The Removal Of A Company Director - Many Changes Are Painful

Change Is The Road To Development 

"Every change is painful", said one of the most prominent personalities of this millennia, namely Karl Marx. This premise speaks volumes about the difficulties which are caused when something big has to change. But then, common logic tells us that change is also inevitable. In fact, it is a must for variability. Or else life and movement will dwindle, which can lead to lifelessness and entropy.

The Changing Of Company Director Is No Exception To The Above Rule 

This logic also applies to the hip and happening world of business, a field of human activity which lies at the base of the economy, which in turn is the factor which fuels civilization and the society. So, in creation, emergence, consolidation and dissolution of companies, there will be points of time when we will have to make big changes. One of these changes is the removal of a director from his/her post. 

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Removing The Company Director 

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. Let us look at three possible cases during the removal of a director:

1) When The Director Himself/Herself Submits his/her Resignation

The concerned director submits his resignation to the Board. In this case, the following steps will be taken to remove his name from the register of directors:

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 in the following format:

“RESOLVED THAT the resignation of Mr. XYZ be and is hereby accepted with immediate effect
“FURTHER RESOLVED THAT the Board places on record its appreciation for the assistance and guidance provided by MR. XYZ during his tenure as Director of the Company”

“RESOLVED FURTHER THAT directors of the company be and are hereby jointly authorized to do all the acts, deeds and things which are necessary to the resignation of the aforesaid person from the directorship of the Company
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 a 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.

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2) When The Board Removes The Director Suo-moto

A Company has the authority to remove a Director by passing an Ordinary Resolution, 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 favour 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) When the Director Does not Attend 3 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.

Conclusion

The removal of a director from the company is a big corporate development and thus there are special laws to tackle the same.  

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