Procedure for Removal of Director from Company

You may wonder as that whether a director can be removed from a company by shareholders of company without will of that director? The simple answer to this question is “Yes”. A director can be removed by shareholders of the company except-

1. A director proposed to be removed is not appointed by the Central Government.
2. A director not being appointed by the tribunal under sec 242 of the Companies Act, 2013

Removal of director is not so easy as it seems to be. Registrar of Companies would scrutiny each and every document for removal of director twice or thrice. Shareholders can remove director by passing an ordinary resolution before the expiry of his tenure of directorship after giving him reasonable opportunity of being heard. Procedure for removal of director is laid down in detail in sec 169 of the Companies Act, 2013.

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Legal section and provisions for Removal of Director from Company

A detailed provisions for removal of director is given under section169 of the Companies Act, 2013 as per which, shareholders of the company can remove director of the company not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard: Provided that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two thirds of the total number of directors according to the principle of proportional representation.

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2 Situation whereby a director can be removed

It is true that shareholders can remove director of the company, but there are few vital situations where a director can be removed as under-

Situation 1: For not attending three Board Meetings in a row

As per sec 167 of Companies Act, 2013 if directors does not attend board meeting for 12 months starting from the day on which he was absent at the first board meeting even after giving due notice for all the meetings, it will be deemed that he has vacated the office and a Form DIR – 12 will be filed on his name and his name will b removed from the Ministry of Corporate Affairs.

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Situation 2: Removal of Director suo moto by the Board

Company has power to remove director suo moto by complying section 169 of the Companies Act, 2013 by issue of special notice under Companies Act, 2013.

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Procedure for Removal of Director from Company 

Removal of director needs a specific procedure to be followed in order to remove his data from Ministry of Corporate Affairs (MCA) Following is step by step procedure for directors removal.

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Step 1: Issue of Special Notice U/S 115 of Companies Act, 2013

The first step is issue of special notice u/s 115 of Companies Act, 2013. Sec 115 of Companies Act, 2013 specifies that a special notice must be issued atleast 14 days before the concerned meeting excluding the day on which a notice is served.

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Step 2: Issue of notice to members of the company

The second step is informing all the members of the company by issue of notice to members of company in the same way as it does in case of any general meeting. Company should ensure that notice is issued to all shareholders of the company.

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Step 3: Intimation to the proposed director to be removed

Once the company intimates Shareholders through issue of notice, the third step is sending an intimation to the proposed director to be removed from the board of the company.

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Step 4: Convene a General Meeting for director’s removal

The forth and most important step is convening a general meeting for according consent of atleast 90% of shareholders for removal of proposed director in general meeting and proceed further for removal.

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Step 5: Opportunity for right to be heard

Once shareholders accords consent in general meeting for director’s removal, atleast an opportunity of being heard is to be provided to the concerned director who is proposed to be removed from the management and control of board of the Company.

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Step 6: Filling of Form DIR-12 with ROC

Once meeting of shareholders is convened, the next step comes to intimate the Registrar of Companies (ROC) by filling form DIR-12 with the ROC within 30 days from the date of passing of meeting of the company.

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Documents to be attached with DIR-12

1. CTC of Board Meeting
2. CTC of Ordinary Resolution passed in the General Meeting
3. Copy of Special Notice for the director to be removed
4. Notice of General Meeting with explanatory Statement.
5. Notice sent to director concerned.

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Step 7: Directors appointment in case of casual vacancy

When any director is removed, it is but obvious that a casual vacancy arises due to his removal, so it is very important for any Company to fill this casual vacancy simultaneously with removal

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Step 8: Appointment of director due to casual vacancy to be intimated

Once a company makes provision for appointment of new director due to casual vacancy, it is very vital to inform to ROC in eform DIR-12 about his appointment within 30 days from the date of general meeting.

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Conclusion:

A director can be removed by shareholders of the company in General Meeting by giving him special notice u/s 115 of Companies Act 2013 provided removing director should be given fair opportunity of being heard before proceeding further for the filling and other requisite steps by the company.

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