pri Procedure for Removal of Director by Shareholders (Section 169 of Companies Act, 2013) Procedure for Removal of Director by Shareholders (Section 169 of Companies Act, 2013)

Generally management of the company lies with the Board of directors of the company and they always work for the betterment of the company and its shareholders, they are effectively the agents of the company, appointed by the shareholders to manage its day-to-day affairs and with respect to the same principle the Companies Act, 2013 gave them special rights to protect themselves from the outsiders and from the insiders also.

One of the important right which Companies Act gave them is the right to remove the Directors of the company, if they are not acting in accordance with the company’s constitution, and only exercising their powers for their own benefits.

As per Section 169 of the Companies Act, 2013, a company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard.

Procedure for Removal of Director

Through this article, we are going to discuss the procedure for Removal of director in brief:

1. A Special notice of the intention to move a resolution for the removal of director be furnished by No. of members (according to requirement of Section- 115 of Companies Act, 2013) to the company at least 14 days before the meeting at which it is to be moved, excluding the day on which the notice is served and the day of the meeting. (Section 169).

2. Section 115-Special notice to Company- Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. The same should be signed by the concerned shareholders.

3. The company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The director shall have the right to be heard on the resolution at the meeting.

4. The director, who is sought to be removed, can make a representation in writing against his removal and request the company to notify it to the company’s members [section 169]. If the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must.

  • Mention in the notice of the resolution to be moved at the annual general meeting, the fact of the representation having been received; and
  • Send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

5. Hold and convene a General meeting & pass an ordinary resolution for the removal of Director.

6. File e-form no. DIR-12with the Registrar of Companies within 30 days of passing the resolution.

7. The vacancy is created under this section after the removal of the director then in the same meeting of the removal another director is being appointed for time being, and a special notice of the intended appointment is provided.

8. The newly appointed director has to hold the post until the duration up to the new formal appointment of the director is made.

9. When a director is removed as aforementioned, his office vacates automatically u/s 167.

10. The removed director is liable for the damages and compensation which is required to be payable to him in lieu of his removal or termination according to the prescribed terms and conditions of the appointment.

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July 2021