Removal of director in a company
Companies are constructed with a group of directors. They help to manage, regulate and administer the affairs of the company according to MOA and AOA. A company has the right to appoint a new director and also to remove an existing director if he goes against the rules.
In this context, let’s see about directors how they can be removed, on what basis a company can remove the director, the process for the removal, and related
consequences, and some exceptions for the removal of a director from the company.
A group of directors plays a very important role in operating a business. If a director can be appointed anytime in the running of the business, a director can also be removed
There are certain reasons to remove directors from the company such as,
- If the directors are incurred any disqualifications according to the Companies Act 2013.
- If they fail to attend board meetings for a duration of 12 months.
- If any directors stand against section 183 of companies act 2013, by entering into agreements.
- Courts disqualify the directors.
- If they have committed any crime and are imprisoned for not less than 6 months.
- If the directors would voluntarily resign the position
- If the directors don’t follow the instructions provided in the Companies Act 2013.
So these are the reasons why a director can be removed
What is the procedure to be followed in order to remove a director from the company?
The process to remove the directors from the company is,
- When he voluntarily resigns the position.
- If he is willing to go out of the company then the company will circulate the notice about conducting board meetings by giving 7 days of prior notice.
- The board of directors and shareholders in the meeting decide whether to accept the resignation or not.
- After the board accepts the resignation, it will pass a resolution regarding the removal of the partner.
- After that, the resigned director must file Form DIR-11 with a board resolution copy and his resignation letter.
- Along with that, the company must file Form DIR-12 with the registrar of companies with a board resolution copy and resignation letter.
- By filing DIR-12 along with prescribed fees with the registrar of companies, the outgoing director's name will be removed from the ministry of corporate affairs (MCA) list.
So this was about the process of voluntary resignation by the director
Why did the company Remove the director?
The company can remove the director anytime in the course of business bypass an ordinary resolution.
- The company will call for a board meeting with 7 days of notification regarding the removal of a director.
- On that meeting, an extraordinary general meeting will be passed along with a resolution to be approved by the shareholders for the removal of a director will be passed.
- By giving 21 days of notice, the general meeting will be held. In this meeting, they vote whether to remove or not. The removal of the director will be decided on the majority of votes.
- A chance will be given to the director to be heard before passing the final resolution.
- After passing the resolution, he should file the DIR-11 form and the company should file the DIR-12 form along with the copy of a resolution with ROC.
- Then as usual the ministry of corporate affairs will remove the name of that director from the list.
This is how a director is removed by the company.
- If the director skips 3 board meetings continuously.
- According to Companies Act 2013, if a director does not attend his board meeting for 12 months, that is, from the first board meeting, even after giving notices it is understood that he has left the position and form DIR-12 will be formed by the company to the registry of corporate affairs and his name shall be deleted in the ministry of corporate affairs lists of directors.
So this is the procedure to be followed by the company in order to remove a director from its organization
What are the problems to be faced for not filing from DIR-12
The form DIR-12 must be filed within 30 days of the resignation of a director. If your company fails to do, you are invited to pay some penalties,
- First 30 days to 60 days – twice the government fees.
- From 60 days to 90 days – four times the government fees.
- More than 90 days – 10 times the government fees.
- In case it exceeds more than 180 days – 12 times the government fees along with compounding offense.
The punishable amount shall not be less than 50 thousand but may exceed 5 lakh rupees.
Exceptions to the removal of director?
Yes, there are some exceptions where company cannot remove the directors such as,
- If the director is appointed by a court or tribunal the company does not have authority to remove him.
- When the company has itself availed the option of not appointing less than two-third of directors for the company, then the company cannot remove as per Companies Act 2013.
So these are the exceptions for the removal of directors in a Company