To run a Company, Companies Act 2013 provides for compulsory appointment of director. These directors can be executive or non-executive, whole time or part time, additional or alternate director. Companies Act 2013 also prescribed procedure for appointment of director. Question arises, if company wants to remove director then how to Remove Director from company or what is the process to remove director from company.
Here in this article we will discuss, how a company can remove director, what is the procedure for removal of director, which forms has to be filed with MCA for removal of director and what other compliances that has to be done for removal of director.
To remove a director from company, the company has to follow the provisions which are laid down in section 169 of Companies Act 2013. The Section 169 gives power to shareholders of company to remove director. If Shareholder wants to remove any director from company then they have to follow the procedure for removal of director as lay down in section 169 of Companies Act 2013.
First understand that in what situations a company can remove director from company. As per provisions of Section 167 of Companies Act 2013, if a director does not attend board meetings for consecutive 12 months then he or she may be removed from directorship. Further a director can itself resign and create casual vacancy. Furthermore company can also suo-moto remove director from company. However if director is appointed by central government then shareholder cannot remove such director from company.
Step by Step Process for Removal of Director From Company: (Case where director did not resign but company suo-moto decided to remove director)
Step 1: The Section 169 of Companies Act 2013 permits shareholders to remove existing director from their directorship. To remove director, an Extra Ordinary General Meeting has to be called. A Special Notice has to be given to share holders for removal of director in Extra Ordinary General Meeting (EGM). Generally directors first call board meeting to send notice of invitation of EGM. Intimation for removal of director has to be given to removing director.
Step 2: An ordinary resolution is to be passed in Extra Ordinary General Meeting for removal of director. An opportunity of being heard has to be given to removing director. If more than 50% of present shareholders caste vote in favour of removal of director then only director can be removed.
Step 3: Once director is removed in Extra Ordinary General Meeting then company is required to file form DIR-12. Form DIR-12 has to be filed within 30 days from EGM in which ordinary resolution is passed.
Point here to be noted that if company is removing one director from company out of 2 directors then company has to first appoint 3rd director then only can remove to director. This is because of that a company has to have minimum 2 directors at all time. So first appoint director then remove existing director.
Step by Step Process for Resignation of Director from a Company:
A director can himself resign from his directorship and submit his resignation to board of director of company. To approve the resignation of director, other director would call a board meeting and may accept his resignation. Let’s understand step by step process for resignation of director:
Step 1: Director will send his resignation to company. The effective date of resignation will be the date on which the notice is received by the company or the date, if any, as specified by the director in the notice itself, whichever is later.
Step 2: Company will call a board meeting and will approve his resignation. Company will also decide that which director will file Form DIR 12 with ROC to inform ROC about resignation of director.
Step 3: Company within 30 days of resignation will file form DIR 12 with ROC.
In both the situations above, director also required to file form DIR 11 with ROC within 30 days of resignation or removal as the case may be.
On the basis of above readings, we conclude that we have answered to question “How to Remove Director from Company” and also tried to explain “step by step process for removal of director and resignation”.