Removal of Director - Overview
According to the company Act 2013, every company is required a minimum number of directors to run it. The minimum number of appointed directors for a private corporation is two and for a public company, it is three. When a director resigns or is removed, the firm must inform and submit a removal notice with the Ministry of Corporate Affairs (MCA). The Registrar of Companies (ROC) remove the concerned Director's name from the company's master data.
Reason For Director Removal
As mentioned above, A director may be subject to removal for any of the following reasons:
- Director becomes disqualified under the Companies Act 2013, such as becoming an undischarged insolvent or being convicted of certain offenses.
- This involves the director being absent from board meetings for over 12 months without any reasonable justification.
- Director entering into contracts or agreements that conflict with the company's interests or violate Section 184 of the Company Act.
- The Court or tribunal issues an order disqualifying the director from holding such a position due to misconduct or other legal reasons.
- Being convicted by a court of an offense and sentenced to at least six months in jail.
- Neglecting or failing to fulfill their legal obligations and responsibilities as a director as outlined in the Companies Act 2013.
- Director chooses to step down from their position voluntarily due to personal or professional reasons.
Ways to Remove a Director from Company.
There are 3 way to remove director from company under company act 2013:
- Resignation
- Removal by Shareholders
- Removal by the Board
Compulsary criteria for Director Removal
To initiate the removal of a director, the following compulsory steps must be followed:
- A Special Notice as per Section 115 of the Companies Act 2013 must be issued.
- The Special Notice must be sent to the concerned Director at least 14 days before the resolution is put to vote.
- The affected Director must be given a chance to present their case, with their representation required to be submitted in writing.
- Once removed, a director cannot be reappointed to the same position.
Document Required for Director Removal
The following document required for removal of director under company act 2013.
- Notice of Board Meeting: A notice must be issued for a board meeting where a resolution for the director's removal will be passed. This notice should be sent to all directors, and the resolution must be approved by a majority vote.
- Special Notice to Director: A special notice outlining the reasons for the director's removal, along with a copy of the board resolution, must be sent to the director in question.
- Resignation Letter: If the director wishes to resign voluntarily, a resignation letter should be obtained and filed with the Ministry of Corporate Affairs (MCA).
- Form DIR-12: Form DIR-12 is used to file details of the director's removal with the MCA. This form must be submitted within 30 days of the director's removal.
- Board Resolution: A certified resolution supporting the director's removal should be prepared and filed directly with the MCA.
- Declaration by Director: A declaration from the director being removed, confirming no objection to their removal, must be obtained.
Conclusion
The dismissal of a director from a company is a significant step requiring thorough deliberation and strict observance of legal protocols outlined in the Companies Act 2013 or applicable local statutes. Whether executed through an ordinary resolution, board resolution, or court mandate, the procedure must uphold principles of fairness, transparency, and the company's overarching welfare.
Wealth4india offers invaluable support in maneuvering through the intricacies of the director removal process, ensuring full adherence to legal stipulations and diligent procedures. Seeking professional assistance and guidance is essential to proficiently carry out this pivotal corporate decision.