The removal of a director in India refers to the process of taking away a director's position in a company before their term ends. It can be initiated by shareholders, the board of directors, or regulatory authorities. The Companies Act, 2013 governs the procedure for removal. Shareholders can remove a director by passing a resolution during a general meeting, usually requiring a special resolution with a majority vote of at least 75%. Additionally, the board of directors can also pass a resolution to remove a director.
PROCEDURE TO REMOVAL OF A DIRECTOR
The procedure for the removal of a director in India typically involves the following steps:
- NOTICE: A notice must be issued to all shareholders informing them about the proposed resolution to remove a director. The notice must comply with the requirements of the Companies Act and the company's Articles of Association.
- GENERAL MEETING:A general meeting of the shareholders is convened to discuss and vote on the resolution for the director's removal. The meeting can be an extraordinary general meeting (EGM) or an annual general meeting (AGM).
- PASSING THE RESOLUTION: The shareholders vote on the resolution, and it must be passed by a majority vote. In most cases, a special resolution is required, which means it needs the approval of at least 75% of the votes cast.
- INTIMATION TO REGISTRAR: Once the resolution is passed, the company must inform the Registrar of Companies (RoC) about the removal of the director within 30 days. This is done by filing the necessary forms and documents with the RoC.
- DIRECTOR'S RESIGNATION OR REMOVAL: After the resolution is passed and the required intimation is made to the RoC, the director is considered removed from their position. They may resign voluntarily or be compelled to step down based on the resolution passed by the shareholders.
DOCUMENTS REQUIRED
- Notice of General Meeting: A formal notice to convene a general meeting of shareholders must be prepared, specifying the agenda item regarding the proposed removal of the director. The notice should comply with the provisions of the Companies Act and the company's Articles of Association.
- Special Resolution: If the removal requires a special resolution, a draft of the resolution should be prepared, clearly stating the intention to remove the director and the required majority for its passage (at least 75% of the votes).
- Minutes of the Meeting: Detailed minutes of the general meeting where the resolution for removal is discussed and voted upon should be prepared. These minutes should record the proceedings, discussions, voting results, and any relevant observations made during the meeting.
- Director's Resignation Letter (if applicable): If the director agrees to step down voluntarily, their resignation letter should be obtained and acknowledged. The resignation letter should state the director's intention to resign and the effective date of their resignation.
- Forms for Intimation to RoC: After the removal resolution is passed, the company is required to file certain forms and documents with the Registrar of Companies (RoC) to inform them about the change in directorship. The specific forms to be filed may include Form DIR-12, which contains details of the new board of directors, along with relevant supporting documents and resolutions.
FAQs
The removal can be initiated by shareholders, the board of directors, or regulatory authorities.
Typically, a special resolution is required, which means it needs the approval of at least 75% of the votes cast.
The company must inform the RoC about the removal of a director by filing the necessary forms and documents within 30 days of the resolution being passed.
No, the removal must follow the procedures outlined in the Companies Act and the company's Articles of Association to ensure compliance with the law.
Directors can be removed for various reasons, including non-performance, breach of duties, misconduct, or if they no longer meet the eligibility criteria mentioned in the Articles of Association.
Yes, a director has the right to challenge their removal in court if they believe the removal was unlawful or not conducted in accordance with the legal requirements.