What are the ways to the removal of a Director from a company?

Introduction

In any company, the Director is the head of the company. Can it be removed? According to the Companies Act, 2013, it is possible to remove a Director. A Director may be removed from the company by the shareholders of the company if he resigns from the post or he is absent for 12 consecutive board meetings. For the removal of a Director, the proposed Director has to file Form DIR-11 and the company has to file Form DIR-12 with the Ministry of Corporate Affairs and each removal should be carefully reviewed by the Registrar of Companies (ROC). A company secretary must be appointed to handle the removal of a Director from a company. There are three possible ways by which a Director is removed and exceptions in the removal of a Director. In this blog, we will discuss all the different ways by which a Director can be removed.

Who is a Director?

A person who is appointed by the company to carry out the statutory duties of the company, and is in charge of managing the affairs of the company is called a Director. The Director is defined under section 2 (34) of the Companies Act, 2013.

Reasons for removal of a Director

Listed below are the reasons for the removal of a Director in any company:

• If he suffers any of the disqualifications mentioned under the Companies Act, 2013.
• If he misses the board meetings for over a year i.e., 12 months.
• If he violates Section 184 of the Companies Act, 2013 by entering into contracts or agreements.
• If there is an order of the court or tribunal which states that he/she is disqualified.
• If he is found guilty by a court in any crime, a minimum sentence of six months imprisonment.
• If he had willingly left the employment.
• If he has not complied with the rules and regulations outlined in the Companies Act, 2013.

Remove a Director from the company

The following are the ways to remove a Director from a company:

1. When a Director is not present for 12 board meetings

According to section 167 of the Companies Act, 2013, if a Director misses a board meeting for a period of 12 months, beginning on the day he missed the first board meeting, even after giving due notice for all meetings. It will be considered that he has resigned from the position. After such resignation, the company should file Form DIR-12 with his name to MCA. After filing the Form the name of the Director will be deleted from the records of the Ministry of Corporate Affairs.

2. When a Director resigns

When a Director of a company submits a resignation to the board. In such a situation, the following steps should be followed to remove the name of the Director.

1. A board meeting will be held by the company after giving seven days’ clear notice (clear notice is defined as 21 days’ notice), excluding the day the notice was submitted and received.

2. In the meeting, the Board will decide whether to accept the resignation or not.

3. Once the Board has approved the resignation of a Director, they will pass a Board resolution in the following format:

• “RESOLVED THAT the resignation of Mr. XYZ be and is hereby accepted with immediate effect
• “FURTHER RESOLVED THAT the Board places on record its appreciation for the assistance and guidance provided by MR. XYZ during his tenure as Director of the Company”
• “RESOLVED FURTHER THAT Directors of the company be and are hereby jointly authorized to do all the acts, deeds, and things which are necessary to the resignation of the aforesaid person from the Directorship of the Company.

4. After the resolution has been approved, the leaving Director must file Form DIR-11 along with the Board Resolution, a copy of the resignation letter, and proof that it has been received.

5. Simataously, the company must file Form DIR – 12 with the Registrar of Companies together with the resignation letter and the board resolution.

6. After completion of filing both Forms, the name of the concerned Director will be deleted from the master data of the company on the MCA portal.

3. When a Director is dismissed by the shareholders

A company has the right to remove a Director just by passing an Ordinary Resolution if the Director was not elected by the Central Government or tribunal. The process is as followed:

• Notice to all the shareholders will be sent 7 days before the date of the Board Meeting.
• In the meeting, the resolution will be presented for the removal of a Director from the company.
• The Director will be provided with an opportunity to speak before the resolution is passed.
• After hearing the Director, the shareholders will decide by voting, and if the majority of the shareholder agrees the resolution will be passed.
• Once the resolution is passed with a majority of 51% or more. Then the proposed Director has to file Form DIR-11 and the company has to file Form DIR-12 along with the Board Resolution and DSC of the proposed Director.
• After completion of filing the Form, the name of the concerned Director will be deleted from the master data of the company on the MCA portal.

Exceptions in the removal of a Director

A Director can be removed by the company’s shareholders. There are some exceptions in the removal of a Director:

• If the proposed Director is appointed by the Central Government.
• If the proposed Director is appointed by the tribunal.

Bottom line

We are concluding this article by saying that when a Director is not present in board meetings for over 12 months when a Director resigns from his/her positions, and when a Director is dismissed by the shareholders are the 3 ways to remove a Director from a company. Form DIR-11 is filed by the Director and Form DIR-12 is filed by the Company to delete the data of the Director from MCA. So we can say that a Director is not a person who is irreplaceable. However, there are certain exceptions in removal of a Director from a company, which are discussed in this article.