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Adding and removing directors from a company’s board of directors

A company’s board of directors may be replaced at any moment as needed. Both an addition and a removal are part of the adjustment. Change may occur voluntarily or in response to a need for it. The necessity for an expert on the board or as a result of the death or resignation of an existing director causes the demand. In any case, a corporation must adhere to the guidelines outlined by the Companies Act in order to display the change.

Addition of director

A director may only be added to a business with the consent of the shareholders at a general meeting. Therefore, a company’s board of directors can be changed by electing a new director at the annual general meeting or by calling an extraordinary general meeting. However, there are situations when neither holding an AGM nor calling an extra general meeting is practical. In these situations, a corporation may elect an additional director at a board meeting and then appoint that director on a permanent basis at the next annual general meeting.

Prerequisites to appoint a Director

Digital Signature

The director must have a DIN

Consent to act as a director in form DIR-2

The process of adding a director

Send notice to directors to call the board meeting in the General Meeting or Extraordinary General Meeting.

Adopt a board resolution calling for a general meeting.
Notify all of the shareholders
Resolution approved in AGM or EGM
Submit form DIR-12 to MCA

The appointment of Additional Director

Send notice to directors to call the board meeting

Pass resolution for the appointment
Submit form DIR-12 to MCA
Pass a resolution to regularise the additional director at the AGM.
Submit form DIR-12 to MCA

Removal of director 

A director may leave the firm willingly or may be removed by the company for a good reason. However, in any scenario, there must be a minimum of 2 directors overall. If the business receives a letter of resignation, it must record it by adopting a board resolution. The day the company gets the notice from the director or, if any, the date stated by the director in the notice, whichever is later, is considered the date the director is presumed to have resigned. The business has 30 days after the resignation to submit a form to MCA.

Director removal by shareholder

A resolution by the company’s shareholders can get rid of a director before the period offer expires. All of the members must get the notice from the company. Additionally, the removal must be disclosed to the director by the corporation. Such a director will get the chance to be heard. He can submit the corporation his statement, and the company can distribute it to the members. Such a declaration may be read in the general meeting if the time frame is brief. Members may adopt a regular resolution to dismiss the director if they see fit. Within 30 days of the removal, the corporation must submit the director removal form to MCA.

Director and the shares that directors own

The new director is not added since it is considered that each director must own business stock. However, it is a truth that not all directors are required to own stock. The addition of a new director is possible without offering shares. Second, it is also assumed that the director must surrender the shares if he or she leaves the company. However, it is not required; a director may continue to own stock in a firm after ceasing to serve in that capacity.

Conclusion

With a change in management or membership, the business continues to exist indefinitely and remains independent. Therefore, any change in directors has no impact on the company.

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For the quotation of the above or for any other query you may contact the author at 9899595719 or [email protected]

Disclaimer: The above article is only for information purpose and is on based on the author’s interpretation of the relevant provision. The same should not be considered as professional advice.

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Author Bio

Experienced Chartered Account with a demonstrated history of working in the accounting industry. Skilled in GST, Income Tax, Internal Audit, Due Diligence, Account Reconciliation, Auditing, and Accounting. Strong accounting professional with a Bachelor of Commerce (B.Com. Hons) focused in Tax Law/Ta View Full Profile

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