Section 168 of the Companies Act 2013 gives a clear view of the resignation of directors which was absent in the early Act, 1956. However before the Companies Act, 2013 when early Act, 1956 was effective, orders passed by the courts adhered to the same principle but the new provision leaves no ambiguity.
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 Resignation shall be the latest date among these two:
- The date on which the notice is received by the company or
- The date specified by the director in the notice.
The date which is later among the above two dates shall be considered for effective date.
As per proviso to section 168(2) of the Companies Act, 2013, the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure. In, State of Karnataka v. Pratap Chand & Ors., the court ruled that the Director is only liable when he is responsible for the operations of the company and for the acts done with his consent and connivance. Thus, on proving the same the directors can be free from personal liability. However, the provisions have been made more stringent. Independent Directors on the board of Nirav Modi’s company were high profile executives like, Sanjay Rishi (American Express president), Gautham Mukkavilli (former Pepsi Co executive) and Suresh Senapathy (former Wipro CFO). Most of them opted for resignation post fraud. Personal assets of these directors are frozen, although independent director is seldom held liable, is not involved in day to day business the (MCA) is in the process of making them held liable, presuming that they know the affairs of the company.
Two independent directors from IDFC sent the resignation letter after being named in FIR by the CBI. Their contention was, being part time directors, their role was limited in the process, however, the ex-deputy MD was arrested due to advancing loans to defunct companies.
The directors can also be held liable after their resignation if found guilty.
The resignation of Independent Directors can be a ringing bell for the shareholder as some mismanagement or unscrupulous activities. It can affect the investment of the company including Foreign Direct Investment. One of the things that are often been looked at by the investors is the board of directors to invest in a company.
Procedure:
1. On receipt of the resignation letter, the company shall hold a meeting of the Board or pass Board circulation to take note of the resignation letter given by the director of the company and to authorise CS or CFO or any director of the company to file requisite form with ROC.
2. In case of listed company, submit disclosure of such resignation to stock exchange within 24 hours from the date of the Board meeting and post the same on the website of the Company within 2 working days.
3. In case of resignation of an independent director of the listed company, submit disclosures of detailed reasons for the resignation and confirmation from the independent director that there are no other material reasons other than those provided. To the stock exchange within 7 working days from the resignation.
4. File intimation with ROC within 30 days from the date of receipt of notice of resignation in Form DIR-12. (Attachment for the Form DIR-12 will be notice of resignation, evidence of cessation and copy of Board resolution.)
5. It is optional for the director to forward a copy of his resignation with ROC in Form DIR-11 with detailed reasons.
6. As per section 170 of the Companies Act, 2013 read with Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014, make necessary entries in the register of directors and key managerial personnel.
7. Make necessary on website and in the Board’ report.
DRAFT RESOLUTION
(To take note of the resignation letter given by the director of the Company)
“RESOLVED THAT the resignation dated_______ received from Mr./ Ms._______ from the directorship of the company, with effect from ___________, copy of the same is tabled before the meeting, be and is hereby noted and the Board places on record its appreciation for the assistance and guidance provided by Mr./ Ms. ________ during his tenure as Director of the Company;
RESOLVED FURTHER THAT Mr./Ms. _________, director and __________, Company Secretary of the Company be and are hereby jointly/ severally authorized on behalf of the Company, to do all such acts, deeds, matters, and things as deem necessary, proper and desirable and to sign, and execute all necessary documents, applications and returns for the purpose of giving effect to the aforesaid resolution.”
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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. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.
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