As per Company Act Shareholders can Remove a Director from the Company before the expiry of his tenure, except appointment by Central Govt.  Removal requires filing of same with MCA, Roc scrutinizes every removal with care. 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: Provided that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two thirds of the total number of directors according to the principle of proportional representation.

1. Removal of Director from Company

i. In case the Director does not attend Board Meetings in a row.

As per section 167 of the Companies Act, 2013 if a Director does not attend a Board Meeting for 12 months even after giving proper notice, then director need to vacated his office.

ii. To remove a Director suo-moto by the Board:

Section 169 of Company Act 2013 given right to shareholders to remove:

Section 169 of the Companies Act, 2013 states that the shareholders can remove the director by passing an ordinary resolution in a general meeting, Let’s analyze step by step procedure to remove a director.

2. Step by step procedure to remove a director

Special Notice under Section 115 of Companies Act A special notice with the intention of removing a director by the specified no. of members of the company has to be issued 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.
Notice to Members by Company The company shall immediately; after it has received the notice should inform its members by a notice of resolution in the same way it does at the time of a general meeting.
Intimation to Concern Director Company should give intimation to the concern director about his removal.
Convene General Meeting Hold General Meeting to take consent of Members in Majority for removal of Directors.
Right to be Heard The director will have the right to be heard on the resolution at the meeting
Intimation to ROC Every Change in Directorship is required to file with ROC in e-from DIR-12 within 30 Days of passing of resolution.
Appointment of Director in Casual Vacancy  A casual vacancy will be created as existing director are going to remove, with help of special notice he can be appoint by company in general meeting or by the Board Meeting & Appointment of such director shall be intimated to ROC in Same form DIR-12.

3. Section 115 of Company Act 2013                                       

A special notice with the intention of removing a director by the specified no. of members of the company has to be issued 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.

4. Notice to Members for Removal of Director from Company

The company shall immediately; after it has received the notice should inform its members by a notice of resolution in the same way it does at the time of a general meeting. (At least 7 Days of the Meeting)

Or

If it is not possible for the company to send notice to all the members, it should publish it in form of an advertisement in a newspaper having an appropriate circulation at least before 7 days of the meeting.

5. Intimation to Concern Director for his Removal

Company should give intimation to the concern director about his removal.

6. Right to be Heard of Director to be removed

The director will have the right to be heard on the resolution at the meeting. Opportunity can be given to the director he can submit his statement in writing against his removal from company.

7. Intimation By Company to all shareholders:

i. If time permitted then

Send notice to its members clear 7 days before of the meeting along with copy of representation copy.

ii. If time not permitted then

If notice not able to reach to all members of company then notice shall be published in English language in English newspaper in the state where the registered office of the company and need to publish on website too. (at least 7 clear days before the meeting)

8. Appointment of Director in Casual Vacancy 

A casual vacancy will be created as existing director are going to remove, with help of special notice he can be appoint by company in general meeting or by the Board Meeting. A director so appointed shall hold office till the date he had not removed. Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors.

Every new director appointment/Resignation is required to file DIR – 12 within 30 Days of passing of resolution.

9. Consequences of Not Filing of Form DIR-12

If the company not filed the e-form DIR-12 within 30 days of appointment/Resignation, then penalty will be applicable as follows;

Upto 15 Days then One time of actual Govt Fees

More then 15 Days – 30 Days then 2 times of Actual Govt Fees

More then 30 Days – 60 Days then 4 times of Actual Govt Fees

More then 180 Days then 10 times of Actual Govt Fees

If company fail to file DIR 12 within 300 Days from date of passing resolution then company need to pay 12 times of Actual Govt Fees plus Compounding offence.

10. Safeguards for Concerned Director against Removal

i. Representation in Writing

The concerned director can make a representation in writing to the company against the notice of removal. He/she is also entitled to make a plea to the company that the representation must be sent to all the members. Also, the members must be notified of the representation through a notice.  If the company is unable to send the copies to all the members, the director may request for the representation to be read out at the meeting. The director is entitled to this right in addition to and without prejudice to his right to be heard orally.

ii. Appeal to the Tribunal

If the organization or any aggrieved person decides against sending out the representation to the members or reading it out in a meeting, they can make an application to the Tribunal, requesting a nullification of the process. The Tribunal is entitled to annul the process, if it finds that the director uses this right to secure unnecessary publicity for defamatory matter. Further, the director is also bestowed with the right to issue an order demanding the director to cover the cost of application borne by the company.

Note: Facts, Documents, information need to recorded from time to time and need to file with MCA as per prescribed forms and fees. Non filing can turn into non compliance and heavy penalty.

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Category : Company Law (4087)
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Tags : Companies Act (2548) Companies Act 2013 (2320)

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