Removal of Director

What Are The Grounds For A Director’s Discharge?

calendar08 May, 2023
timeReading Time: 3 Minutes
What Are The Grounds For A Director's Discharge?

The company’s day-to-day activities are overseen by the Board of Directors, which serves in the capacity of administrators for the business. They never stop looking out for what is in the best interest of the firm as a whole as well as the investors. They now have the capacity to run the firm effectively thanks to the Companies Act of 2013[1], which was passed in 2013. Director’s discharge from Office is one of these authorities. Scroll down to check some important grounds for a Director’s Discharge.

What Are The Grounds For A Director’s Discharge?

The following are some of the grounds on which shareholders may vote for Director’s Discharge from office:

  • In the event that the director is bankrupt,
  • If the director has been convicted of a crime and given a jail term of six months or more by a judge or other legal authority.
  • In the event that a judge has determined that the board member in issue suffers from mental illness.
  • The director does not yet have a Director’s DIN if a tribunal or court has ruled that the director is not qualified to serve in the role of director.

In The Event That A Company Fails To Comply With The Companies Act Of 2013, What Conditions Must Be Satisfied First Before The Removal Of The Company?

  • When a director’s position is eliminated, it is necessary to make a formal notification via passing of a special resolution.
  • Members who possess at least 1% of the entire voting power or members who own shares whose total worth as of the date of the notice is at least INR 5 lakhs are needed to signature the special notice.
  • The Board of Directors does not have the authority to re-appoint former directors.
  • In the event that a director is dismissed from their position, the board of directors is obligated to hold an election as quickly as possible in order to replace the resulting vacancy.
  • The newly chosen director will take up his post immediately and remain there until the end of the period that his immediate predecessor had.

How Is It Possible For A Director To Be Removed From Their Position By The Board Of Directors?

If any of the following circumstances are satisfied, the board of directors has the authority to remove a director from their position:

  1. When there was no justification given for the director’s resignation:
    • For the board to call a general meeting, 7days’ notice is necessary.
    • During the course of the meeting, the board members will discuss the resignation and cast their votes on whether or not to accept it.
    • Following the approval of a resolution by the board to accept the resignation, the board will formally acknowledge the resignation.
    • Along with the resignation letter and board resolution, the forms DIR-11 and DIR-12 need to be submitted to the Registrar of Companies.
  2. If the board decides to fire a director without consulting the director in question i.e., Suo moto
    • Before the board meeting and Director Discharge, all shareholders are given early notice.
    • The director to be removed receives word that the firing process has started.
    • The director to be removed is given the chance to voice their concerns at this point in the process. This is a must for any and all businesses. It is acceptable for the director in issue to hand in a written statement and request that it be read out loud at the meeting.
    • A shareholder meeting is called, and a routine motion to fire the errant director is put to a vote and approved by the shareholders.
    • Form DIR-12 must be submitted in order to satisfy the RoC’s requirements.
  3. The director would be removed from office if they missed four board meetings in a row or any board meeting that was held within the previous year. It has been determined that there is no one to fill the role of director. After that, the RoC requires that a Form DIR-12 be submitted.

Is There Any Kind Of Repercussion For Submitting The DIR-12 Form Late?

Within 30 days after the date when the board resolution authorising the Discharge of a Director was approved, the business is required to file Form DIR – Discharge to the Registrar of Companies. It is possible that the corporation may be subject to significant fines if the paperwork is not turned in by the deadline.

In the event that the firm does not submit the DIR-12 form:

  • The employer will pay twice the regular rate for the first 30 days.
  • If the delay continues for more than 30 days but is less than 60 days, the firm will be charged four times the normal fee.
  • If the delay continues for more than 60 days but is less than 90 days, the corporation will be charged six times the normal amount.
  • If the delay caused by the firm is more than 90 days but less than 180 days, there will be a 10 percent increase in the fee.
  • If the delay continues for more than 180 days, the corporation will be assessed a price that is 12 times more than usual.

Conclusion

The process of Director’s Discharge is one that must follow to the requirements set out in the Director Companies Act of 2013. The lack of this remark might result in the invalidation of the ruling in the event that it is challenged in court.

Read Our Article: What Are The Requirements For Appointing Executive Director?

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