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Procedure For The Resignation and Removal of Director

Shalini Singh
| Updated: 08 Nov, 2019

Everything requires proper management so that it can function correctly. The same thing goes for a Company, and hence we have Directors who are responsible for the management of the company. Directors are the one who promotes the success of the business and benefit to its shareholders. The shareholders elect the Director of a company for managing the affairs of the company as per the MOA[1] (Memorandum of Association) and AOA (Articles of Association) of the company. The Director of a Company can either resign or removed by the Board of Directors or shareholders. Here in this article, we will see in detail the Resignation and removal of Director.

Some Major Highlights about the Resignation and Removal of Director

A Director of a company can resign from the office by giving a notice in writing to the Board of the company.

After this, the company will take the following steps to remove the concerned name from the register of Directors on the MCA Portal.

  • The Board members of the Company will hold a Board meeting by providing seven days of clear notice.  A clear notice is a 21 days Notice issued by the company which excludes the day on which the notice was sent and received.
  • In the board meeting, the Board members will discuss and then decide whether to accept the resignation or not.
  • If the Board accepts the resignation of the Director, they will pass a Board resolution accepting the resignation in the following format :
    • “Resolved that the resignation of Mr. ABC is accepted with immediate effect.
    • “FURTHER RESOLVED “ that Mr. ABC has performed really well during his/her tenure as the Director of the company. The Board places this appreciation as record.
    • “RESOLVED FURTHER” that the concerned Director who is putting forward his/her resignation is hereby authorized to do all acts, deeds and things which are necessary for the resignation procedure of the Director from the Directorship position of the company.
  • After the resolution is being passed, the outgoing director will file the form DIR-11 along with the Board Resolution, a proof of the delivery of the resignation letter and copy of the resignation letter.
  • Two forms of DIR-11 and DIR-12 are needed to be filed in this case. DIR-11 is filed by the Director while DIR-12 is filed by the company itself with the ROC (Registrar of the Companies) along with the Resignation of the letter and the Board Resolution.
  • In the end, the name of the concerned director who has given his/her resignation will be removed from the master data of the company of the MCA (Ministry of Corporate Affairs) website.

Removal of Directors

The Board of Directors or shareholders can remove the Directors of a company if he/she incurs any of the disqualifications specified under the Act, or he/she is absent from the Board meeting over 12 months. Also, if the concerned director enters into a contract or arrangement against the provision of section 184, then that Director is convicted by the court and can be sentenced to imprisonment for not less than six months.

NOTE: A company has the right to remove the Director only if the Central government or the Tribunal do not appoint the Director.

Procedure for the Removal of the Director

Two cases arise either the Company itself removes the Director, or in case the Director does not attend three Board meetings in a row.

In case the Company removes the Director :

  • Seven days’ notice will be given to all the Directors informing about the removal of Directors.
  • In the Board meeting, a resolution for the holding of an (EGM) extraordinary general meeting will be held along with the resolution for the removal of the director subject to the approval of the shareholders.
  • The Board members of the Company will hold a Board meeting by providing seven days of clear notice.  A clear notice is a 21 days Notice issued by the company which excludes the day on which the notice was sent and received.
  • In the board meeting, the Board members will discuss and then decide whether to remove the Director.
  • Before passing the final resolution, a choice is given to the Director to present anything in favour of himself.
  • After the resolution is being passed, two forms of DIR-11 and DIR-12 are needed to be filed in this case. The Director files DIR-11 while the company itself files DIR-12 with the ROC (Registrar of the Companies) along with the Resignation of the letter and the Board Resolution.
  • In the end, the name of the concerned director to be removed is withdrawn from the master data of the company of the MCA (Ministry of Corporate Affairs) website.

In case the Director does not attend three Board meetings in a row :

  • According to Section 167 of the Companies Act, 2013, if a director does not attend three Board meeting in a row within the time span of 12 months. This 12 month means the day on which he was absent at the first board meeting even if he/she got the prior notice of all the meetings.
  • The absence of the Director will be considered as if he/she has left the office and the FORM DIR-2 is filed then.
  • After this, the name of that concerned Director will be removed from the MCA website.

Final thoughts

The resignation and removal of director in any company entirely depend upon the company itself and the Director. The concerned director who wishes to resign needs to follow a different procedure whereas if the Board of Directors and the shareholders itself removes the director, then it takes a different procedure to follow.

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Author Info

Shalini Singh

Shalini is a tech graduate but her keen interest in writing impelled her to continue as a content writer. Further, She has a rich experience in Companies Act and Ammendment related topics.

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