There are some instances in which performance of Company is being hampered due to any one or more directors and the situations are so unfortunate in which the director acting in good faith face obstacles to run a business of so that the company run in a smooth manner.
Hence a situation arises when company needs to remove any of its director/directors to streamline the management of the Company.
Before Removal of any of the Director we need to know which directors cannot be removed:
- Director Appointed by Tribunal
- Director Appointed principle of Proportional Representation
Step 1 Notice to Board of Director to hold Board Meeting.
Step 2 Concerned Director needs to be informed about his removal.
Step 3 Sending Notice along with Agenda of Board Meeting to all the Directors of company.
Step 4 Convey Board Meeting and pass the Board Resolution to remove the Director of the Company.
Step 5 Prepare Notice and Agenda of General Meeting.
Step 6 Sending of general meeting notice to all the members at least 14 days before date of General Meeting along with special notice with the intention of removing a director by the specified No. of members of the company has to be passed at least before 14 days before the concerned meeting at which it has to moved excluding the day on which the notice is served and the day of the meeting.
A special notice required to be given to the company shall be signed, either individually or collectively by such number of members holding not less than one percent of total voting power or holding shares on which an aggregate sum of not more than five lakh rupees has been paid up on the date of the notice.
Step 7 Holding of General Meeting, allowing the removing director to be heard and speak. Passing of ordinary resolution if it is seems just and equitable. Preparation of Documents for removal of director and intimation to concerned departments.
Step 8 Preparation of Documents for removal of director and intimation to Concerned Departments.
Points to be Noted:
1. The director who was removed from office shall not be re-appointed as a director by the Board of Directors
2. Also note that an to remove a director, two third of consent of members/Special resolution is required to remove an Independent director.
3. The very first thing is that the director in question is given fair chance to explain why he should not be removed.
Forms
- E-form MGT-14
- E-form DIR-12
Penalty: If a company contravenes said provisions, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.
Conclusion
The removal of a director under the Companies Act 2013 is a meticulous process aimed at preserving the integrity and efficiency of corporate governance. By following the prescribed steps and adhering to legal requirements, companies can ensure transparent and fair directorial transitions while upholding the interests of stakeholders and the company at large.
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