The removal of directors is a significant corporate governance issue, and it is regulated by both the Companies Act 2013 and SEBI (Securities and Exchange Board of India) Listing Regulations. These regulations ensure transparency, accountability, and fairness in the process of director removal to safeguard the interests of shareholders and stakeholders.
Provisions under the Companies Act 2013:
The Companies Act 2013 governs the appointment, reappointment, and removal of directors in India. Here are key provisions related to the removal of directors:
- Removal by Ordinary Resolution: Section 169 of the Companies Act stipulates that an ordinary resolution passed by the shareholders at a general meeting can remove a director before the expiry of their term.
- Special Notice: Shareholders intending to propose the removal of a director must give a special notice to the company at least 100 days before the general meeting. The notice must also be sent to the director concerned.
- Opportunity to Be Heard: The director to be removed is entitled to be heard at the meeting and may make a representation in writing.
- No Removal if Appointed by the Tribunal: If a director is appointed by the Tribunal or Central Government, they cannot be removed by ordinary resolution.
- Vacation of Office: If a director is removed, their office becomes vacant from the date of the general meeting where the resolution is passed.
- Resignation: A director may also resign from the board voluntarily by giving written notice to the company.
Provisions under SEBI Listing Regulations:
SEBI Listing Regulations apply to companies listed on stock exchanges in India. They also contain provisions related to the removal of directors:
- Listing Agreement Compliance: Companies listed on stock exchanges must adhere to the Listing Agreement or Listing Regulations. Compliance with corporate governance norms, including director removal, is mandatory.
- Disclosure Requirements: SEBI mandates that listed companies must disclose information about the removal of directors to stock exchanges promptly. This disclosure should include details of the resolution, special notice, and the outcome of the general meeting.
- Role of the Board: The board of directors is responsible for overseeing the corporate governance of the company, and they must ensure that the removal of directors is carried out in accordance with applicable laws and regulations.
- Independent Directors: SEBI requires that the composition of the board includes a certain number of independent directors. The removal of such directors should comply with SEBI’s guidelines.
It’s important to note that the specifics of director removal can vary based on the company’s articles of association, the Companies Act, and SEBI Listing Regulations. Companies should always consult legal professionals and follow the applicable laws and regulations to ensure compliance when removing directors.
In conclusion, the removal of directors under the Companies Act 2013 and SEBI Listing Regulations is a carefully regulated process designed to protect the interests of shareholders and maintain corporate governance standards. Companies must be aware of these provisions and follow the prescribed procedures when removing directors.