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Removing a Director - Overview:
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. It is possible to add or remove a director from the company at any time. There are different reasons why a director is removed and there are three different procedures based on the reason.
Reasons to Remove a Director
A director can be removed for any of the following reasons:
- If they incur any of the disqualifications specified under the Companies Act
- If they absent themselves from board meetings over 12 months
- If they enter into contracts or arrangements against the provisions of Section 184 of the Companies Act
- If they are disqualified by an order of a court or tribunal
- If they are convicted by a court of any offence and sentenced to imprisonment for not less than six months
- If they have not abided by the terms and protocols mentioned in the Companies Act of 2013
- If they have resigned voluntarily from their position.
Ways to Remove a Director
There are 3 ways to remove a director from a company:
1. When the Director himself gives Resignation
The steps to be followed in this scenario are:
- Holding a board meeting by giving seven days of clear notice
- In the meeting, the board members will take note of the resignation
- Then they have to pass a resolution in a particular format to that effect
- After that, Form DIR-11 needs to be filed by the resigning director in his individual capacity
- The company has to file Form DIR-12 with the registrar of companies (RoC) along with the registration letter and the board resolution
- When all the forms are filled and the formalities for the removal of the director are done, the name of the director will be removed from the master data of the company on the Ministry of Corporate Affairs (MCA) website.
2. Director Remains Absent from the Board Meetings for 12 Months
- If a director absents himself from all the meetings of the board of directors held over a period of twelve months, with or without seeking leave of absence from the board, they are considered to have vacated their office as per Section 167
- A Form (DIR-12) must be filed
- Upon completion of the formalities, the concerned director’s name will be removed from the database of the Ministry of Corporate Affairs (MCA).
3. Removal of Director by Shareholders
- A notice is sent to all the shareholders for a board meeting required to be conducted within seven days from the date of the issue
- A resolution is passed to have a general meeting and then for the removal of the director, subject to the approval of the shareholders on the day of the meeting
- After providing a 21-day notice, the second meeting of shareholders is held to vote on the resolution passed earlier and the director who is being removed by the shareholders will be allowed to speak on their removal
- The shareholders must file Form DIR-12, along with the attachments of the board resolution, and an ordinary resolution
- Once all the formalities are over, the name of the concerned director is removed from the database of the Ministry of Corporate Affairs (MCA) and its website.
This is the simplified version of the whole process. The removal procedure has to be carried out carefully and should follow the procedure laid down in the Companies Act.
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Types of Directors
There are various types of director of the company, the following are mentioned below:
An executive director is also known as “Whole-time director” he is the one who is a full-time employee for a particular company.
A “Managing Director” means a Director who, by virtue of an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of affairs of the company.
The ordinary director is the one who will attend the Board of meeting or some important matters in the company.
hese types of directors are a way different to the Managing director and Executive director.
Usually, alternate Directors are appointed for a person who is Non-Resident Indian (NRI) or for foreign collaborators of a company. Alternate Director is someone appointed by the Board of Directors in a general meeting to act for a Director called the “original director” during his absence.
Banks and Private Equity investors who grant debt or equity assistance to a company generally impose a condition as to the appointment of their representative on the Board of the concerned Company. These nominated persons are called Nominee Director.
Any of the directors acquiring the professional qualifications and do not have enough interest in financial interest is known as Professional Director.
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Remove a Director FAQs FAQs
How can a director of a company be removed?
- By the director by giving their resignation
- If the director is absent from board meetings for 12 months
- By the shareholders, if they deem it necessary.