3. Removal of Director

Removing a director from a company can be necessary for various reasons, including performance issues, non-compliance, or personal circumstances. The process for removing a director is governed by the Companies Act, 2013, and requires adherence to specific legal requirements. Below is a detailed  of the compliance process for the removal of a director.

Compliance Requirements

  1. Authority to Remove: The authority to remove a director generally rests with the shareholders of the company, unless the director is appointed by the government or under special provisions in the Articles of Association (AoA).
  2. Types of Directors:
  1. Regular Directors: These can be removed by a simple majority vote in a general meeting.
  2. Managing Directors or Whole-time Directors: Special resolution may be required, depending on the terms of their appointment.

Legal Process

  1. Notice of Intention:
  2. A notice must be sent to the director proposed to be removed, informing them of the intention to remove them and the grounds for removal.
  3. Board Meeting:
  4. A board meeting should be convened to discuss the matter. If the decision is to proceed with removal, a resolution should be passed recommending the removal to the shareholders.
  5. General Meeting:
  1. A general meeting must be called where the shareholders will vote on the resolution to remove the director.
  2. The resolution must be passed by an ordinary resolution (simple majority).
  3. Filing with the Registrar of Companies (ROC):
  1. After the resolution is passed, Form DIR-12 (Notice of Change of Director) must be filed with the ROC, along with a copy of the resolution passed.
  2. If the director is a member of the company, their membership must also be transferred.
  3. Informing the Director:
  4. The company must inform the director about the resolution and the effective date of removal.

Required Documentation

  • Board Resolution: Documenting the decision to recommend removal.
  • Notice to the Director: Formal notice informing them of the intention to remove.
  • Minutes of General Meeting: Recording the proceedings and resolution passed in the general meeting.
  • Form DIR-12: Filed with the ROC to notify the removal.
  • Resignation Letter: If applicable, a resignation letter from the director may also be collected.

Charges

  • Professional Fees: ₹1,500 – ₹5,000 for assistance in the removal process, which may include legal consultation, drafting of resolutions, and filing documents.
  • Government Fees: Applicable charges for filing Form DIR-12 with the ROC (usually nominal).

Timeline

  • The removal process can typically take anywhere from a few days to a few weeks, depending on the company’s internal procedures and the availability of documentation.

Important Considerations

  • Legal Grounds for Removal: Ensure that the reasons for removal are legally valid and not discriminatory.
  • Director’s Rights: The director has the right to be heard in the general meeting, and they may present their case against removal.
  • Compliance with AoA: Always check the Articles of Association for any specific procedures or requirements related to the removal of directors.

Conclusion

Removing a director is a structured process that must be handled with care to ensure compliance with legal requirements and to maintain corporate governance standards. Companies should seek legal or professional assistance if they are uncertain about the process or implications involved in removing a director.