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Directors are an important part of the company for running the operation and for the growth of the company as the director takes the major decision for the development of the company. The main focus of the directors in promoting the value of the company and give benefits to the shareholders of the company. So to maintain this the company can appoint or remove the director from its board. Removing a director from a company requires careful consideration, depending on the circumstances.
Removal of a Director as per the Companies Act, 2013:
Section 169 of the Companies Act 2013 deal with removal of a director and states that a company can remove a director before the tenure of his office by passing an ordinary resolution, unless he has been appointed as a director by the Tribunal under section 242 of the Act of 2013 after providing him a reasonable opportunity of being heard.
The removal of a director is not as simple as it appears. Every document would be scrutinized twice or thrice by the Registrar of Companies in order to decide whether a director should be removed.
Case 1: When the Director Resigns Voluntarily
The concerned director submits his resignation to the Board. In this case, the following steps will be taken to remove his name from the register of directors:
- The company will hold a Board Meeting by giving seven days of clear notice (Clear notice means 21 days notice excluding the day on which the notice was sent and received.
- The Board then discusses and deliberates on the decision to either accept or reject the resignation.
- If the Board accepts the resignation, the board passes a resolution to confirm the acceptance of the resignation.
- The outgoing director must then file a Form DIR-11, along with a copy of the resignation letter, and proof of its delivery.
- While the filing of DIR – 11 is the responsibility of the director, form DIR – 12 is the responsibility of the company which has to be filed with the Registrar of Companies along with the Resignation letter and the Board Resolution.
- After filing all the forms, the name of the director will be removed from the master data of the Company on the Ministry of Corporate Affairs website.
Case 2: When the Director Shows Absenteeism From Board Meetings
- If a director fails to attend consecutive 3 board meetings during 12 months in a year with or without leave of absence then as per section 167 of the companies act, 2013 it will be considered as that the director has vacated the office.
- The company has to file DIR-12 and intimate the Registrar for removal of such director due to absence from the meeting
- After filing of DIR-12 the registrar will remove the name of the director from its register and will update on the MCA database.
Case 3: When the Board Decides to Remove a Director Suo-Moto
By complying with Section 169 of the Companies Act, 2013, the company has the power to dismiss a director suo moto by issuing a special notice and the procedure is as follows:
- A board meeting shall be called by circulating seven days notice to all directors before the meeting
- In the Board meeting of the company, a board resolution shall be passed for the removal of the director along with calling of the general meeting
- A notice for calling the general meeting shall be circulated to all the shareholders and directors along with the notice for removal of the director at least 21 clear days before the meeting
- In the general meeting, the shareholders of the company will decide the removal of the director and if majority members make their decision in favor of removal of the director then the director has to vacate his position from the directorship of the company
- An opportunity of being heard shall be given to the director before passing any resolution for his removal in the meeting
- Once the resolution for removal of a director is passed the company has to file DIR-12 along with the copy of the resolution passed to the registrar for the intimation of such removal
- After receiving the form from the company the registrar will remove the name of the director from its register as well as from the MCA database and the registrar will update such change on its website.
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Note: This Post was last updated on March 20, 2023
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