Removal of a Director
The removal of a director from a company is a significant decision that can have a profound impact on its operations and governance. It typically involves a formal process that requires careful consideration and adherence to legal procedures. The removal of a director can occur for various reasons, such as underperformance, breach of fiduciary duties, conflict of interest, or a loss of trust and confidence. Shareholders usually hold the authority to remove a director through a majority vote during a general meeting or an extraordinary general meeting.
Removal of Directors from a private limited company can be done under the following circumstances:
- The Board's unilateral removal of a Director.
- Director submits his resignation directly
- Officer's vacation: The Director misses three consecutive board meetings of the corporation or business.
Procedure to remove director from the company by Shareholders:
- A notice of the meeting of the Board of Directors shall be delivered to each Shareholder at least seven days before the date of the meeting.
- The procedure for the removal of a director from a company is proposed in a resolution that is successfully passed, subject to shareholder approval on the meeting day.
- The second meeting of shareholders is conducted after giving a 21-day notice to vote on the resolution voted previously, and the director who the shareholders are removing will be permitted to speak on their dismissal.
- Form DIR-12, the board resolution's attachments, and an ordinary resolution must all be filed by the shareholders.
- Once all procedures have been followed, the company's concerned director's name is deleted from the Ministry of Corporate Affairs (MCA) database and website.
Documents needed for the removal of a director of a company:
For the removal of a director of a company from a private limited company, the following papers are necessary:
1. Photo: The appointed director's passport-sized photo.
2. Pan card: A self-attested pan card for the chosen director
3. Aadhar card, voter ID, passport, or driver's license as proof of residence
4. Digital Signature Certificate
5. The identity proof (passport, election card, driver's license, or Aadhar card) that was previously mentioned
6. The director's personal and business email addresses and mobile phone number
7. The director must apostil all documents if he or she is a non-resident of India.
8. A resignation letter was delivered to the company
9. Delivery evidence
10. A type of acknowledgement, if one was given
Who has the power to remove director of a company?
According to Section 115, only shareholders with at least 1% of the voting power or shareholders holding shares with a total value of at least 5,000 have the capacity to remove a director and can physically notify the company of their desire to do so. The relevant shareholders must approve the same. The shareholders of a firm may put forth the following basic resolution:
- Removing the company's director
- submitting a nomination for a director in the vacated position.
The person having the power to dismiss a director may do so if the director is not performing his or her duties satisfactorily or has missed three consecutive board meetings. A director must attend board meetings, per Section 167 of the 2013 Companies Act, or else his name would be removed from the Ministry of Corporate Affairs. The board of directors has the authority to decide this.
Post compliances after the removal of a director of a company :
The Company shall file the foregoing documents, together with any necessary attachments, with the Registrar within thirty (30) days of the date of the General Meeting. It must also finish all required entries in the company's statutory records within the window of time specified by the 2013 Companies Act.
What conditions must be met before the removal of a director of a company?
Giving the director in issue a fair opportunity to defend their continued employment is the first step. The company and each official who is in default are subject to a fine of not less than 50,000 but not less than 5 lakhs if the company violates these rules. The documents needed to remove the director are E-form MGT-14 and E-form DIR-12.
It is difficult to fire a director from a company. The Companies Act of 2013's Section 169 governs the dismissal of Directors (formerly Section 284 of the Companies Act of 1956). Since we all understand that Directors are ultimately answerable to Shareholders, the right to removal of a directors has always been given to Shareholders. Regarding the procedure under the 2013 Companies Act, nothing has changed. With the exception of Directors appointed by the Tribunal for the deterence of tyranny and mismanagement under Section 242 and Directors nominated in accordance with the principle of proportional representation under Section 163, Investors may remove any Director prior to the expiration of their residency.
