Introduction to Resignation of Director as per Section 168 of Companies Act, 2013:
Resignation of a director is a significant event in a company’s corporate governance. The process and requirements for resignations are outlined in the Companies Act, 2013, and Companies (Qualifications and Appointments of Directors) Rules, 2014. This article provides an overview of the procedures and responsibilities associated with director resignations, ensuring compliance with the relevant regulations.
Resignation of Director
When a director wishes to resign, they must follow the prescribed procedures to ensure a smooth transition and legal compliance.
A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same. The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later.
Effective date of Resignation
The effective date of the resignation is determined by the later of two dates: the date on which the notice is received by the company or the date specified by the director in the resignation notice. The resignation takes effect from this determined date.
Resignation Duty of the Company
Upon receiving the resignation notice, the company has a duty to take note of the resignation and fulfill certain obligations. Within 30 days of acknowledging the resignation, the company must submit an application in Form DIR-12 to the Registrar of Companies. This form notifies the Registrar of the director’s resignation, and upon approval, the director’s name will be removed from the register of directors.
Directors Liability After Resignation
It is important to note that a director’s liability after resigning depends on the circumstances. If any offense occurs after the resignation, the director’s liability is discharged by the resignation letter. However, if any wrongful acts were committed during the director’s tenure, they may still be held liable.
The procedure for handling director resignations typically involves several steps:
1. The company must hold a board meeting or circulate a board resolution to take note of the director’s resignation and authorize a designated person, such as the Company Secretary (CS) or Chief Financial Officer (CFO), to file the necessary forms with the Registrar of Companies.
2. In the case of a listed company, disclosure of the resignation must be submitted to the stock exchange within 24 hours of the board meeting, and the information should also be posted on the company’s website within 2 working days.
3. If an independent director resigns from a listed company, detailed reasons for the resignation must be disclosed to the stock exchange within 7 working days, along with confirmation from the independent director that there are no other material reasons for the resignation.
4. Within 30 days of receiving the resignation notice, the company must file an intimation with the Registrar of Companies in Form DIR-12, including the necessary attachments such as the resignation notice, evidence of cessation, and a copy of the board resolution.
5. It is optional for the director to also submit a copy of their resignation with the Registrar of Companies in Form DIR-11, providing detailed reasons for the resignation.
6. As per the Companies Act, 2013, and the relevant rules, the company must update the register of directors and key managerial personnel to reflect the resignation.
7. The company should also make the necessary disclosures on its website and in the Board’s report.
Conclusion: Resignation of a director requires adherence to the procedures and obligations outlined in the Companies Act, 2013, and the Companies (Qualifications and Appointments of Directors) Rules, 2014. By following these guidelines, companies can ensure a smooth transition and fulfill their legal responsibilities. It is essential to consult the relevant laws and regulations to ensure compliance with the current provisions.
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Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws.
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