Removal Of a Director

The principal role of a director is to manage a company and maximize the benefits to its shareholders by following the rules, regulations, and guidelines provided by the Government. While the shareholders appoint a director, only the Board of Directors or shareholders can only remove the director of a Company under section 169 of the act.

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LEGAL BITS YOU SHOULD KNOW

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How to apply?

There are 3 ways by which the director of the company can be removed

  1. When the director has not  attended three consecutive board meetings in the year

As per section 167 of the Companies Act, 2013 if a director doesn't attend the Board Meeting for 12 months, even after sending him/her due notice for all meetings, it will be considered that he/she has abandoned the office. It will be deemed that he has vacated the office and a Form DIR – 12 will be filed on his name and his name will be removed from the Ministry of Corporate Affairs. 

  1. Removal of director suo-moto by the board

As per Section 169 of the Companies Act 2013, shareholders have the authority to remove the director by passing an ordinary resolution in a general meeting, except in the case the Director was appointed by the Central Government or the Tribunal because, under that provision, only the central government will have the authority to remove a director.

However, the board has to follow the following procedure to remove a director;

  1. The board must provide a Seven-day notice to all the Directors informing about the removal of Directors.
  2. The Board members of the company will hold a Board meeting by providing seven days of clear notice.
  3. In the board meeting, an extraordinary general meeting needs to be called for, under which approval of shareholders will be taken for the removal of the director after evaluation of the case.
  4. This notice has to be issued within 21 days by the company which excludes the day on which the notice was sent and received.
  5. Before passing the final resolution, a choice is given to the director to present his argument. After the resolution is being passed, the director will be retired from the board.
  1. Where the Director himself gives his resignation

If the director of the company doesn't wish to continue with the company and wants to resign/retire due to any reason, then the company will have to provide seven days' notice to hold a board meeting. The notice period would exclude the day on which the notice is sent and received. Upon the approval of the shareholders of the company, the director will be retired.

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