Directors play a vital role in a company's day-to-day operations. They represent the shareholders and manage various aspects of the business. However, there are circumstances when the removal of a director becomes necessary. FilingDigits is here to assist you through this process efficiently.

Reasons for Director Removal

Directors can be removed for various reasons, including:

1. Disqualifications: Violating the Companies Act can lead to disqualification.
2. Prolonged Absence: Directors absent from board meetings for over 12 months may face removal.
3. Contractual Violations: Engaging in agreements against the Companies Act can be a cause.
4. Disqualification Orders: Court-issued disqualification orders necessitate removal.
5. Criminal Convictions: Directors sentenced to at least six months in prison.
6. Non-compliance: Failure to adhere to the Companies Act provisions.
7. Voluntary Resignation: Directors can also choose to resign voluntarily.

Methods for Director Removal

Directors can be removed through:

1. Resignation: When directors voluntarily resign.
2. Absence: If a director remains absent from board meetings for 12 months.
3. Shareholder-initiated: When shareholders decide to remove a director.

Key Legal Provisions

Several legal provisions govern director removal:

1. Section 169, Companies Act, 2013: Outlines legal procedures and requirements.
2. Section 115, Companies Act, 2013: Relates to appointment of additional directors.
3. Section 163, Companies Act, 2013: Allows proportional representation in director appointment.
4. Rule 23, Companies (Management and Administration) Rules, 2014: Provides guidelines for director removal.

Compulsory Criteria for Director Removal

Certain requirements must be met for director removal:

1. Special Notice: Section 115 requires issuing a Special Notice.
2. 14-Day Notice: Directors must receive the Special Notice 14 days before the resolution.
3. Director's Representation: Directors have the right to present their case in writing.
4. No Reappointment: A removed director cannot be reappointed.

Form DIR-12

Form DIR-12 is crucial for director removal. It's a legal requirement under the Companies Act 2013 and must be submitted when removing a director.

Procedure for Director Removal

Here's a step-by-step guide:

1. Resignation by Directors

• Hold a Board Meeting with 21 days' notice.
• Discuss and pass a resolution accepting the resignation.
• File Form DIR-11 and DIR-12.
• The director's name will be removed from the Ministry of Corporate Affairs website.

2. Director Absence from Board Meetings for 12 Months

• File Form DIR-12 after a director has been absent for 12 months.
• The director's name will be removed from the Ministry of Corporate Affairs database.

3. Director Removal by Shareholders

• Call a Board Meeting and inform directors of the intended removal.
• Pass a resolution for an Extraordinary General Meeting (EGM).
• Issue a 21-day notice for the EGM.
• Members vote on the resolution for removal.
• Allow the director to present their case.
• Submit Form DIR-11 and DIR-12.
• The director's name will be officially removed from the Ministry of Corporate Affairs website.

Consequences of Failing to File Form DIR-12

Timely submission of Form DIR-12 is crucial. Penalties for delay include government fees and potential compounding offenses.

Implications of Director Removal

Removing a director has significant implications, including the termination of their duties and potential legal consequences. It's essential to handle the process with sensitivity and confidentiality.

Conclusion

Removing a director is a major decision that requires adherence to legal procedures. Whether through an ordinary resolution, board resolution, or court order, fairness, transparency, and alignment with the company's best interests are paramount. FilingDigits can guide you through this process, ensuring compliance and efficiency.

For any queries or assistance related to director removal, please click here or send your query to inbox@filingdigits.com. You can also connect with us through WhatsApp at +91-74286 88100.

Last updated: 20th Dec 2023