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Removal of Director

 

Every private company must have at least 2 directors, and in the case of a public corporation, at least three directors are required. A Private company has the rights to remove a director if he is caught in any of the incompetence stated as per the Act, absents himself/herself from board adherence for more than 12 months. If it enters into arrangements or agreements against the provisos of section 184, it gets barred by order of a court or is convicted by a court or Tribunal of any crime and condemned to imprisonment for more than 6months.

 

Details of Participation in the Removal of the Director of the Company

The Stockholders or members who are owning shares more than a sum of Rs 5,00,000 as  their paid-up capital shares for a period of notice or are keeping more than 1% of the total voting power, can mail a special proclamation to the company for the process of 'removal of the director.'
Shareholders profess the power to make the decision of the date, time and venue of the meeting. Nevertheless, the particular notice should not be sent before three months from the time of the Board meeting, although the resolution of the board meeting is to be moved at least 14 days earlier than the date of the meeting. The conceived director has provided the option of being heard about the meeting before the board of the directors of the company. If the objects are formalized by the board of the directors and the stockholders, then they can eliminate the process of the removal of the Director after consideration.

 

Understandings behind Resignation of Directors

  • Dispute With The Board

When many directors work ordinarily, a difference of opinion may happen which results in hindering the overall operation or performance of the company; in such a situation, the directors may take a decision to resign.

  • More Beneficial Career Opening

Everyone looks for a more substantial career opportunity to elaborate their domain, and choose that next option which encourages their inner aspiring. Same like the directors may resign if they obtain a better option or some venture wherein he got chosen as a director by AOA.

  • Suspension Due To Infringement

Any non-adherence, violation, or defaults on the director’s end can lead him into trouble.

  • Misuse In The Company Affairs

When a director is involved in the illegal practices of the company, hence the director may find himself being dragged into it that meets his reason for resignation. To oppose himself from personal liability appearing out of such activities, he chooses to resign.

  • Suspension Due To Infringement

Any violation, non-adherence, or defaults on the director’s end can head the way into trouble.

  • The Recession Of Nomination

It is only allowed to the Nominee directors who primarily get placed by the NBFC’s capitalists or investors on the BOD. After completing the transaction between the company and entity is complete, now the Nominee director of the company can resign, or he may also leave the company after the removal of nomination.

 

The Eligibility Criteria to be a Director

 

There are no specified designated qualifications mentioned or followed to become a director of the company, but an individual should follow with the following mentors be a director of the company:

As per the law, a specific natural person only can become a director of any company.

  • Determination Of Nationality

There is no confinement. However, a minimum of one Indian director in the company is compulsory.

  • Determination Of Nationality

There is no restriction. However, there must be a minimum of one Indian director in the company.

  • Age Demarcation

There is no specified fixed age to become a director, but it is necessary that the individual who should be skilled to enter into any company contract. Furthermore, in a matter of 'managing director,'  'independent' director or  'full-time' director, of an authorized company, the person qualifies to be a director if he or she is of 21 years old and has not above 70 years old officially.

  • Limit Of Valid Directorship

At a time, any individual can only be a director of 20 separate companies and out of these 20 companies, ten can be public limited companies.

  • DIN Needed

To qualify to be the director of the company, the individual must obtain a Director Identification Number. The main purpose behind obtaining a DIN is to ensure that fake directors do not dupery, and in case the person has any black mark such as criminal activity, they can be caught using this unique number.

 

Ineligibility

  • Unsound Mind Or Bankrupt Person

Any Individual who is of an unstable mind or is fumbling or making decisions on his own without any second thought cannot be appointed as a director of the company. This includes children, mentally disabled people, and builds with unstable mental faculties. Moreover, individuals or insolvent people who have held bankruptcy claims in the court of law are not qualified from acting directors.

  • Criminal Background

If the individual has a criminal record or lawful claims and was doomed to confinement for more than seven years, then that individual cannot be a director of the company.

  • Pending Overdue Returns

If the recommended person has not met previous returns in any of the past years, he or she shall be banned from becoming the director.

 

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Resignation of the Director under Section 168

  • Any director of the company can resign from his position by providing written notice. Once such notice is collected, the Board members shall take note of the same, and the company shall intimate the Registrar in a formal manner with time, and form as designated. Following that-

  • The company shall place the notice of such resignation after the general gathering of the company in a report of directors shortly.

  • The director shall also suggest and forward a copy of the resignation with a precise reason for his resignation from the position of Director of the company to the Registrar within a month or 30 days of resignation.

  • The resignation of a director of the company should take its influence from the time or date on which the company approved his notice or from the itemized period stated by the director in mind, whatever comes later: Provided- that the director of the company who has resigned should be liable for the offences which came along while his tenure even after his resignation.

  • Whenever all the directors resign at the same time, then the Central Government or the promoter shall select the awaited number of directors during which old directors of the company have to hold company till the new ones or new director get nominated by the company in the announced general meeting.

 

To remove a Directorsuo-moto by the Board

A Company has the power to remove a Director by authorizing an Ordinary Resolution, provided the Director was not ordained by the Central Government or the Tribunal.

  • A Board Meeting will be conducted within 7 days’ notice is sent to all the directors. A special notice will be mailed to the directors stating them about the process of removal of the director.

  • During the Board Meeting, a resolution for the agreeing of an extraordinary general meeting will be authorized with the resolution for the removal of the director from the company subject to the approval of the shareholders of the company.

  • A general meeting will be conducted within 21 days by issuing the clear notice. In the general meeting, the members of the company will be asked to vote on the removal of the director. If the majority is in favour of the removal decision, then the resolution will be authorized.

  • Before the authorizing of the resolution, a chance of being heard will be provided to the director.

  • Once the resolution is passed, the same process will be followed, and the forms DIR – 11 and DIR – 12 will be submitted with all needed documents of the Board Resolution, Ordinary Resolution.

  • Once the forms are filed, the name of the director will be removed from the MCA or Ministry of Corporate Affairs official website.

 

In case the Director of the Company does not attend three continuous Board Meetings

According to the section 167 of the Companies Act, 2013 if a Director does not present in the Board Meeting of the company for 12 months, commencing from the day on which he was not present at the first board meeting even after passing due notice for all the board meetings, it will be held that he has resigned the office and a Form DIR – 12 will be submitted on his name and his name will be struck off from the MCA or Ministry of Corporate Affairs.

 

 

DISCLAIMER- These materials are public information and have been prepared solely for educational purposes. These materials reflect only the personal views of the author and are not individual legal advice.

It is understood that each case is fact specific and that the appropriate solution in any case will vary. Finally, the owner will not be accountable for any loses injuries or damages from the exposures or usage of this information

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