It is frequently asked that whether shareholders can remove a director from company without the will of the director, the answer is “Yes”.
Yes, a Company can remove a director from the company without the will of that director until and unless the director proposed to be removed is appointed by the Central Government or by the Tribunal.
Section 169 of the Companies Act, 2013 has prescribed the detailed procedure for the removal of a director by the shareholders from the company. The procedure of removal of Directors seems easy prima-facie; however, it is quite complicated as the Registrar of Companies scrutinizes each and every document of removal of director for more than once.
In this Blog, we will discuss the detailed process of removal of director by shareholders and other provisions related thereto.
Procedure of Removal of Director from Company by Shareholders
Ensure Director can be removed – perquisites of removal
The first and the most primary step for removal of director is to check and ensure that director can be removed from the company. The Company is empowered to remove any director of the company except following
- When the Director has been appointed by Central Government, or
- Director has been appointed by Tribunal within the provisions of Section 242 of the Companies Act, 2013.
- Director appointed on the basis of principle of proportional representation under Section 163 of the Companies Act, 2013.
Issue of Special Notice of intention of removal of directorunder Section 115
- The second step is that shareholder or shareholders either individually or jointly send a 14 days prior special noticeof intention to remove any director to the company.
- Provided that the shareholder or shareholders must be holding at least 1% of total voting power of the company or holding shares on which an aggregate sum of not more than INR 5 Lakh has been paid up on the date of the notice.
Issue of notice of meeting for removal of director
On receipt of this notice, the company is required to send a 7 days prior notice of Board Meeting along with the Draft Resolutions required to be passed in the meetingfor removal of directorto the Board of Directors of the company.
Company shall intimate the director proposed to be removed
Subsequently, the Company is required to intimate the director proposed to be removed from the company by sending a copy of special notice. The company is bound to inform the concerned director about his right to opportunity of being heard.
Convene the Board Meeting and pass the Board Resolution
The next step is to convene the Board Meeting whereby the Board Resolution for the removal of director shall be passed.
Preparation of Draft Minutes and circulate it to all the Directors for comments thereon
- The company is required to prepare draft minutes of the Board Meeting and then send them to all the directors within 15 days from the date of Board Meeting.
- Thereafter, the directors have to give comments on these draft minutes within 7 days from the date of circulation of draft minutes.
- Lastly, the company is required to enter the minutes of the meeting in the Minute Book of the Board Meeting. It shall be signed by the chairman of the meeting. Moreover, it shall also be certified by the Company Secretary or by any director in absence of CS.
Representation by Director proposed to be removed
The Director proposed to be removed can make representation in writing against the removal and he is also entitled to request the company to inform the company members about the written representation. Thereafter, if the written representation is not lengthy and there is enough time to send to all members then the company must send such representation to all the members of the company.
Issue of notice of general meeting for removal of director
On receipt of this notice, the company is required to send a 21 days prior notice of General Meeting along with the Draft Resolutions required to be passed in the meetingfor removal of directorto allthe members, directors, auditors, secretarial auditors and Debenture Trustees of the company. However, a shorter period notice can be given subject to fulfillment of prescribed conditions.
Convene the General Meeting and pass the Ordinary Resolution
The next step is to convene the General Meeting whereby the Ordinary Resolution for the removal of director shall be passed. The company shall prepare proper minutes of the meeting and it shall be signed by the chairman. Thereby, director is removed from the company.
File MGT-14 with ROC
Once the director is removed, the next step is to file Form MGT-14 with the Registrar of Companies within 30 days from the date of passing of ordinary resolution.
Intimate ROC about removal of director – Form DIR-12
Lastly, the company is required to inform the ROC about the removal of director by filing Form DIR-12 with the ROC within 30 days from the date of passing of ordinary resolution. Subsequently, the director’s name shall be removed from the Register of Companies.
Conclusion
The procedure of removal of director is tough indeed, thus each and every step requires utmost care and caution. If you are looking for professionals’ help to remove the director then contact Your Trustworthy Advisors Manthan Experts by dialing +91 9643-969-969 or mail us at info@manthanexperts.com. Our Experts Team will guide through the entire process and help you comply.
Knowledge Source:
FAQ On Resignation Of Director Under Companies Act, 2013