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Remove Directors

Overview

The removal of directors from a company is a significant aspect of corporate governance, ensuring that the leadership aligns with the best interests of the shareholders and the company. According to the Companies Act 2013, a director can be removed before the expiration of their tenure through an ordinary resolution passed by the shareholders in a general meeting, provided they adhere to the prescribed procedures. This process is essential for maintaining accountability and addressing any issues related to incompetence, misconduct, or breach of fiduciary duties by a director. It involves giving the concerned director a chance to be heard, ensuring fairness and transparency. Additionally, the board may also remove a director if they fail to meet specific statutory requirements or are disqualified under relevant laws. This mechanism not only safeguards the company’s integrity and reputation but also empowers shareholders to act in the company’s best interests, thereby promoting effective management and governance.

Grounds for Removal

Directors can be removed under various circumstances, including:

  • Non-performance: Failure to meet performance expectations or neglecting duties.
  • Misconduct: Involvement in fraudulent activities, breach of trust, or unethical behaviour.
  • Legal Disqualification: Disqualification under provisions of the Companies Act or other applicable laws.
  • Conflict of Interest: Situations where a director’s interests conflict with those of the company.

Removal Procedure

By Shareholders

  • Special Notice: A special notice of the intention to remove a director must be given by shareholders holding at least 1% of total voting power or shares worth at least INR 5 lakh.
  • Board Meeting: The notice is presented at a Board meeting, and a resolution is passed to convene a general meeting of the shareholders.
  • General Meeting: A general meeting is called where shareholders vote on the resolution to remove the director.
  • Opportunity to be Heard: The director proposed to be removed is given an opportunity to be heard at the meeting.
  • Resolution: If the resolution is passed by a simple majority, the director is removed from their position.

By Tribunal

  • Application to Tribunal: In cases of oppression, mismanagement, or fraudulent activities, shareholders or the company can apply to the National Company Law Tribunal (NCLT) for the removal of a director.
  • NCLT Hearing: The NCLT conducts a hearing and examines the evidence presented.
  • Tribunal Order: Based on the findings, the NCLT can issue an order for the removal of the director.

Compliance Requirements

  • Filing with ROC: The Company must file a Form DIR-12 with the Registrar of Companies (ROC) within 30 days of the director’s removal.
  • Updating Records: The company’s internal records, including the register of directors and official website, must be updated to reflect the change.

Legal Safeguards

  • Right to Representation: Directors have the right to represent themselves and present their case against removal.
  • Fair Process: The removal process must adhere to principles of natural justice, ensuring it is conducted fairly and transparently.

Importance of Proper Procedure

  • Avoiding Legal Complications: Adhering to the prescribed procedure helps avoid potential legal disputes and penalties.
  • Maintaining Corporate Governance: Ensuring the removal process is compliant with the Companies Act 2013 upholds the company’s commitment to good corporate governance practices.

Documents required for removal of director

The removal of a director from a company involves a formal process that requires the submission of specific documents to ensure compliance with the Companies Act 2013. Here’s a comprehensive list of the essential documents needed:

Special Notice

  • A special notice of the intention to remove the director, issued by shareholders holding at least 1% of total voting power or shares worth at least INR 5 lakh.
  • This notice should be served to the company in writing, specifying the director to be removed and the grounds for removal.

Resolution for Removal

  • A resolution for the removal of the director, passed by the shareholders at a general meeting.
  • The resolution should be adopted by a simple majority vote of the shareholders present at the meeting.

Board Resolution

  • A copy of the board resolution convening the general meeting for the purpose of considering the resolution for removal of the director.
  • This resolution should be passed in a duly convened Board Meeting.

Notice of General Meeting

  • Notice convening the general meeting where the resolution for the removal of the director will be considered.
  • The notice should specify the date, time, and place of the meeting, along with the agenda items, including the resolution for director removal.

Director’s Response

  • Any written response or representation submitted by the director proposed to be removed.
  • This allows the director to present their case and defend against the allegations or grounds for removal.

Extract of Minutes

  • An extract of the minutes of the general meeting where the resolution for director removal was passed.
  • This should document the proceedings of the meeting, including the discussion on the resolution and the voting results.

Form DIR-12

  • Filing of Form DIR-12 with the Registrar of Companies (ROC) within 30 days of the director’s removal.
  • The form should include details of the director’s removal, along with relevant attachments such as the board resolution and minutes of the general meeting.

Updated Registers

  • Updating the company’s registers and records to reflect the removal of the director.
  • This includes the register of directors and key managerial personnel, as well as any other internal records maintained by the company.

Notification to Director

  • A formal notification to the director informing them of their removal from the board.
  • This notification should be issued promptly after the resolution for removal is passed.

Declaration of Compliance

  • A declaration by the company confirming that all statutory requirements for the removal of the director have been met.
  • This ensures that the removal process has been conducted in accordance with the Companies Act 2013.

Why Choose Us?

Choosing ComplianceBuddy for the removal of directors ensures a seamless, compliant, and efficient process. Our team of experts is well-versed in the intricacies of the Companies Act 2013, providing you with the assurance that every step is handled with precision and adherence to legal standards. We understand that removing a director can be a sensitive and complex issue, often involving legal and procedural nuances. ComplianceBuddy offers end-to-end support, from drafting special notices and resolutions to filing necessary documents with the Registrar of Companies (ROC). Our personalized approach ensures that we tailor our services to meet your company’s unique needs, minimizing disruption and maintaining governance standards. Additionally, we prioritize transparent communication and provide continuous updates throughout the process, allowing you to focus on your core business activities while we manage the compliance requirements. With ComplianceBuddy, you can navigate the removal of directors with confidence, knowing that your company’s legal and regulatory obligations are in expert hands.

Register Your Private Limited Company with ComplianceBuddy Today. We are one point solution for all your business requirements.