Remove a Director

What makes the removal of the director necessary?

Every private company should have a minimum of two directors whereas a public company shall have a minimum of three directors. A company can remove a director if he incurs any of the disqualifications specified under the Act, absents himself/herself from board meetings over 12 months, enters into contracts or arrangements against the provisions of section 184, disqualified by an order of a court or Tribunal, or is convicted by a court of any offense and sentenced to imprisonment for not less than six months.

The removal of a director from a company becomes also necessary if he/she has not abided by the terms and protocols mentioned in the Companies Act, 2013 or have resigned voluntarily from his position.

What is the procedure for the removal of a director?

Let us look at the procedure for removal of a director in three different circumstances:

Removal of a director by shareholders

• Notice of Meeting: A notice is sent to all the shareholders for a board meeting, required to be conducted within a period of seven days from date of issue.
• Passing of Resolution: 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.
• Another meeting: After providing a 21-day notice, a second meeting of shareholders is held to vote on the resolution passed earlier, to move forward with it or not.
• A chance to be heard: The director who is being removed by the shareholders will be given an opportunity to speak on his/her removal.
• Form DIR-11 & DIR-12: The shareholders must file Form DIR-11 and Form DIR-12, along with the attachments of the Board Resolution, and an ordinary resolution.
• Removal of name: Once all the formalities are over, the name of the concerned director is removed from the Ministry of Corporate Affairs (MCA) database, and its website

There are several steps through which the removal process can take place:

• A notice should be sent to all the directors to hold a board meeting within seven days. Additionally, all the directors of the organization will receive a notice informing them about the removal of the director.
• Followed by the notice and on the board meeting, a resolution will be passed for holding the extraordinary general meeting. Along with it, the resolution for the removal of the director will also be passed. This resolution will be subject to the approval of the shareholders on the day when the board meeting will be held.
• There would again be a general meeting after providing 21 days to serve notice to the members. The meeting is conducted for the members of the board to vote for the particular resolution taken by the company for the removal of directors in company law. The decision will be made based on the majority of the votes. If the majority of the votes are in favor of the resolution, the same will be passed accordingly.
• But, before the resolution is passed, the director for whom the resolution is passed will be given an opportunity of being heard.
• Once the resolution is passed, the concerned director and the company must file two forms namely: Form DIR-11 and Form DIR-12 respectively. And, the two forms will be accompanied by copies of the Board Resolution and the ordinary resolution.
• Once all the formalities are over, and the form has been filed, the name of the concerned director will be removed from the Ministry of Corporate Affairs (MCA) database and subsequently from the MCA website as well.

Removal of the director when he submits the Resignation by himself

Sometimes, a director of the company, for any reason, may wish to resign from the post he holds. In such a scenario, the company must follow the below-mentioned steps to complete the process of removal of directors in company law.

• Firstly, 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.
• In the board meeting, the board members would decide whether to accept the resignation submitted by the director or not. The board members will discuss among themselves and will also hear from the concerned director before reaching a proper decision.
• Once they decide to accept the resignation of the director, the further process will take place. A Board resolution on accepting the resignation will be passed in the following format: “RESOLVED THAT the resignation of the (Director Name) and is hereby accepted with an immediate effect”.

“FURTHER RESOLVED THAT the Board places on record its appreciation for the assistance and guidance provided by Mr./Ms (Director Name) during his tenure as Director of the Company”.

“RESOLVED FURTHER THAT

directors of the company are hereby jointly authorized to do all the acts, deeds, and things which are necessary to the resignation of the aforesaid person from the directorship of the Company”.

• After the resolution is passed, form DIR-11 needs to be filed by the director who will be relieved from his/her directorship post. Along with Form DIR-11, the Board Resolution, Proof of delivery of the resignation letter and copy of the resignation letter will be attached.
• The director is accountable for the filing of DIR-11 whereas it is the responsibility of the company to file the 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 removal of the director are done, the name of the Director, who wants to resign, will be removed from the master data of the company in the Ministry of Company Affairs (MCA) website.

If the director remains absent in 3 Consecutive Board Meetings in a year

• If a director remains absent from the Board meetings of the company on 3 consecutive occasions in 12 months (a year), then the absenteeism has to be taken seriously. The duration is calculated from the day on which he/she was not available from the first meeting and to any of the meetings, even after sending him/her due notice for all the meetings. It will be considered that he/she has abandoned the office. Necessary steps will then be taken as per section 167 of the Companies Act, 2013 for his removal for the directorship of the company.
• A Form (DIR-12) must be filed on the missing director’s name.
• Upon completion of the formalities, the concerned director’s name will be removed from the database of the Ministry of Corporate Affairs (MCA).

What are the consequences of not filing the form DIR-12?

Within 30 days from the date of resignation, if the company fails to or doesn’t file the form DIR-12, then the following penalty will be applicable. e-Form DIR-12 is also available for submission.

• One-time payment of actual Government fees until 15 days;
• If it exceeds 15 days, twice the actual government fee need to be paid by the company
• A penalty of 4 times the actual government fee is applicable if the period exceeds 30 days to 60 days
• In case it exceeds 180 days, 10 times the actual government fee is applicable
• If the company fails to file the form DIR -12 within 300 days from the date of passing the resolution, then it has to pay 12 times the actual government fee and will be booked for the compounding offense as well.

What is Section 115 of the Companies Act 2013?

This section of the Companies Act 2013 deals with Board resolutions that require special notice. As mentioned in this section, special notice is required for a resolution for the removal of a director by shareholders before the expiry of the tenure of his office. The notice specifying such an intention to pass a resolution can only be given to the company by shareholders holding not less than 1% of the total voting power or holding shares not exceeding Rs 5, 00, 000 in aggregate, by following the below-mentioned procedure-

• The signing of a special notice- The special notice needs to be signed individually or collectively by such members or shareholders
• Sending notice to the company- Such a notice should be sent to the company at least 14 days before the Board meeting. The notice period would exclude the day on which the notice is sent and the day of the Bo
• Receipt of notice- Immediately after the notice is received, the company will give notice of the resolution to its members at least 7 days before t
• Publication of meeting- Wherever it is not practicable to serve the notice in the manner prescribed, it will be published ( at least 7 days before the Meeting) in a widely circulated newspaper in the State where the company registered office is located. It can also be posted on the comp
• Intimation to the concerned director- The company should intimate the concerned director about the procedure initiated for his removal. The director will reserve the right of being heard on the resolution being passed in the meeting. He is at liberty to submit his written statement against the resolution to
• Intimation to all the shareholders- the company will give notice to its shareholders at least 7 days before the meeting. If there is not enough time to serve notice, it will be published (at least 7 days before the Meeting) in a widely circulate
• Filing of the resolution with the RoC- The resolution needs to be filed with the RoC in the MGT-14 e-Form, within thirty days of passing.

Vakilsearch’s Procedure for Removal of a Director

3 Working Days

By ordinary resolution, the director can be removed before the expiry of his period of office, provided he does not hold office for life. Special notice of any resolution to remove a director must be sent by the company to the director concerned. The director (whether or not he is a member of the company) shall be entitled to be heard on the resolution at the meeting.

10 Working Days

The company should wait for an explanation from him. If no reply is received, special notice must be given and, through members' approval, the director can be removed. File the DIR-12 with the Registrar of Companies. Within 10 to 15 days, the director will be removed.

Documents required for Remove Director

In India, Remove Director cannot be done with out proper identity and address proof. These documents will be needed for all the directors and the shareholders of the company to be incorporated. Listed below are the documents that are accepted by MCA for the online company registration process acceptable.

Identity And Address Proof

• Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
• Scanned copy of Voter’s ID/Passport/Driver’s License
• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned passport-sized photograph specimen signature (blank document with signature [directors only])

For the foreign nationals, an apostilled or notarized copy of the passport has to be submitted mandatorily. All documents submitted should be valid. The residence proof documents like the bank statement or the electricity bill must be less than 2 months old.

Registered Office Proof

For online company registration in India, the company must have a registered office in India. To prove admittance to the registered office, a recent copy of an electricity bill or the property tax receipt or water bill must be submitted. Along with the rental agreement, utility bill or the sale deed and a letter from the landlord with her/his consent to use the office as a registered office of the company should be submitted.

• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill
• Scanned copy of Notarized rental agreement in English
• Scanned copy of No-objection certificate from the property owner
• Scanned copy of sale deed/property deed in English (in case of owned property)

Note: Your registered office need not be a commercial space; it can be your residence too.