Remove a Director from the Company

What is Remove a Director from the Company?

• Every private company has to have a minimum of two directors, and any public company has to have at least three directors at any given time. As per Company Act, Shareholders can Remove a Director from the Company before the expire of his tenure, except appointment by Central Govt. Removal requires filing of same with MCA, ROC scrutinises every removal with care. Let us look at three possible cases during the removal of a director:

1. Where the Director himself gives his resignation: The concerned director submits his resignation to the Board. The company will hold a Board Meeting by giving seven days of clear notice (Clear notice means 21 days notice excluding the day on which the notice was sent and received. When the Board meets, they will discuss amongst themselves and decide whether to accept the resignation or not. Once the Board accepts the resignation of the director they will pass a Board resolution accepting the resignation. After the passing of the resolution, form DIR – 11 has to be filed by the outgoing director along with the Board Resolution, Proof of delivery of the resignation letter and copy of the resignation letter. While the filing of DIR – 11 is the responsibility of the director, form DIR – 12 is the responsibility of the company which has to be filed with the Registrar of Companies along with the Resignation letter and the Board Resolution. After filing all the forms, the name of the director will be removed from the master data of the Company on the Ministry of Corporate Affairs website.

2. To remove a Director suo-moto by the Board: Section 169 of the Companies Act, 2013 states that the shareholders can remove the director by passing an ordinary resolution in a general meeting, given the Director was not appointed by the Central Government or the Tribunal. A Board Meeting will be called by giving seven days’ notice to all the directors. A special notice will go to the directors informing them about the removal of the director. On the day of the Board Meeting, a resolution for the holding of an extraordinary general meeting will be passed along with the resolution for the removal of the director subject to the approval of the shareholders. A general meeting will be held by giving 21 days clear notice. In the meeting, the members will be asked to vote on the matter. If the majority is in favor of the decision, the resolution will be passed. Before the passing of the resolution, an opportunity of being heard will be given to the director. After the passing of the resolution, the same procedure will be followed, and the forms DIR – 11 and DIR – 12 will be filed along with the same attachments of the Board Resolution, Ordinary Resolution. After the filing of the forms, the name of the director will be struck off from the Ministry of Corporate Affairs website.

3. In case the Director does not attend three Board Meetings in a row: As per section 167 of the Companies Act, 2013 if a Director does not attend a 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 b filed on his name and his name will b removed from the Ministry of Corporate Affairs.

CONSEQUENCES OF NOT FILING OF FORM MGT-14:

• Every Special Resolution is required to file with ROC in e-from MGT-14 within 30 Days of passing of resolution. If the company not filed the board resolution in e-form MGT 14 within 30 days of passing of Resolution, then penalty will be applicable as follows: Upto 15 Days then One time of actual Govt Fees. More then 15 Days – 30 Days then 2 times of Actual Govt Fees. More then 30 Days – 60 Days then 4 times of Actual Govt Fees. More then 180 Days then 10 times of Actual Govt Fees. Appointment of Director in Casual Vacancy: A casual vacancy will be created as existing director are going to remove, with help of special notice he can be appoint by company in general meeting or by the Board Meeting. A director so appointed shall hold office till the date he had not removed.

CONSEQUENCES OF NOT FILING OF FORM DIR-12:

Every new director appointment/Resgination is required to file DIR – 12 within 30 Days of passing of resolution. If the company not filed the e-form DIR-12 within 30 days of appointment/Resignation, then penalty will be applicable as follows; Upto 15 Days then One time of actual Govt Fees More then 15 Days – 30 Days then 2 times of Actual Govt Fees More then 30 Days – 60 Days then 4 times of Actual Govt Fees More then 180 Days then 10 times of Actual Govt Fees If company fail to file DIR 12 within 300 Days from date of passing resolution then company need to pay 12 times of Actual Govt Fees plus Compounding offence.