Summary: The Companies Act, 2013, governs the resignation and removal of directors, ensuring proper compliance with legal procedures. As per Section 168, a director can resign by submitting a written notice to the company. The resignation is effective from the date the notice is received or the date specified in it, whichever is later. The company must inform the Registrar of Companies (ROC) within 30 days using Form DIR-12. Despite resigning, a director remains liable for any actions taken during their tenure. For removal, Section 169 allows a company to remove a director (except those appointed by the Tribunal) through an ordinary resolution. Shareholders must send a special notice, and the concerned director must be given an opportunity to present their case before the resolution is passed in a general meeting. If the removal involves an independent director serving a second term, a special resolution is required. After approval, the company must file Form DIR-12 with the ROC along with necessary documents. These provisions ensure transparency and compliance in managing directorial changes within a company.
INTRODUCTION:
The Board of Directors serves as the primary governing body responsible for overseeing and managing a company’s operations. Each director is entrusted with the authority to supervise and administer the company’s affairs. According to Section 149 of the Companies Act, 2013, a Private Limited Company must have at least two directors, while a Limited Company requires a minimum of three directors.
Furthermore, a company may have a maximum of 15 directors on its Board; however, it can appoint more than 15 directors by passing a special resolution. A director may either resign or be removed from the company, provided that the appropriate legal procedures outlined in the Companies Act, 2013, are followed.
The specific procedures for the resignation and removal of a director are elaborated as follows.
RESIGNATION OF DIRECTOR:
In accordance with Section 168(1), a director has the right to resign from their position by submitting a written notice to the company. Upon receiving such notice, the Board is required to acknowledge it and inform the Registrar of Companies (ROC) in the prescribed manner. As stipulated in Section 168(2), the resignation of a director becomes effective on the date the notice is received by the company or on a specified date mentioned in the notice, whichever occurs later. It is important to note that a resigning director remains liable for any offenses committed during their term of office, even after their resignation.
Below are the procedure to be followed by the Company:
- The resignation letter should be signed by the director
- A board meeting shall be convened to take note of the resignation
- Intimation to ROC shall be sent within 30 days from the date of the receipt of the notice or the date mentioned in the letter whichever is later in form DIR-12
REMOVAL OF THE DIRECTOR:
According to Section 169 of the Companies Act, 2013, a company has the authority to remove a director (excluding those appointed by the Tribunal under Section 242 of the Companies Act, 2013) through the passage of an ordinary resolution.
In the event that a special resolution is adopted for the removal of an independent director, it is necessary to file MGT-14. Additionally, to effectuate the removal of a director, the company must submit Form DIR-12.
An independent director who is re-appointed for a second term in accordance with Section 149(10) of the Companies Act, 2013 may only be removed by the company through the passage of a special resolution, and only after affording him a reasonable opportunity to present his case.
Below are the procedure to be followed by the Company:
- The Shareholder will send a special notice proposing removal of the director, and company will send a copy of special notice to concern director for representation/statement,
- Hold a Board meeting and approve the notice to call general meeting (AGM/EGM).
- Company will issue general meeting notice at-least 21 days in advance and such notice should contain representation filed by director, but if representation could not be sent it shall be read out at general meeting.
- In General Meeting, members will pass ordinary resolution after giving an opportunity of being heard to the concerned director.
- Company will file DIR -12 with ROC, along with copy of special notice, general meeting notice, ordinary resolution and wait for the approval of MCA.
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