{"id":51653,"date":"2023-01-07T11:44:21","date_gmt":"2023-01-07T06:14:21","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=51653"},"modified":"2023-01-07T11:44:22","modified_gmt":"2023-01-07T06:14:22","slug":"different-modes-of-removal-of-directors","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/","title":{"rendered":"Different Modes of Removal of Directors &#8211; An Overview"},"content":{"rendered":"\n<p>Boards are always considered as the power centres of a\ncorporate entity. Therefore every company that has been incorporated as per the\nrules of the Company Act of 2013 or the Limited Liability Partnership Act is\nrequired to maintain a minimum number of directors in the company. These are\ntwo in the case of a Private Company, three in the case of a Public Company,\none in the case of a <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/one-person-company\">One Person Company<\/a><\/strong> (OPC), and two in the case of a Limited Liability\nPartnership (LLAP). In this blog, we will discuss different modes, and procedure\nfor the removal of Directors. <\/p>\n\n\n\n<p>The process for appointing a director in the company\nother than a retiring director is outlined under&nbsp;<em>Section 160<\/em>&nbsp;of\nthe Companies Act, 2013 and&nbsp;<em>Rule 13<\/em>&nbsp;of the Companies\n(Appointment and Qualification of Directors) Rules of 2014.&nbsp;<\/p>\n\n\n\n<p>As a general rule, the appointing authority should be the\none to remove a director, but this is not always the case. The right to\nterminate a company director is not limited to shareholders alone. Any change\nin company\u2019s directors need to be reported to the concerned ROC (Registrar of\nCompanies) at the time of alteration. A corporation can intimate such change in\nthe Board of Directors by filing e-Form DIR-12 with the Registrar of Companies\n(ROC) within 30 days from the date the resolution for change in director is\nmoved in the company meeting. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Who_Are_Directors\" >Who Are Directors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Removal_of_Directors_as_Per_Section_169_of_the_Companies_Act\" >Removal of Directors as Per Section 169 of the Companies Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Section_1671b_of_Companies_Act_of_2013_%E2%80%93_Removal_of_Directors\" >Section 167(1)(b) of Companies Act of 2013 \u2013 Removal of\nDirectors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Removal_of_Directors_by_the_National_Company_Law_Tribunal\" >Removal of Directors by\nthe National Company Law Tribunal<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#What_Are_The_Exceptions_To_The_Removal_Of_Directors\" >What Are The Exceptions To The Removal Of Directors?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Are_There_Any_Preconditions_Before_Removing_A_Director\" >Are There Any Preconditions Before Removing A Director?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Penalties_for_Not_Following_with_the_Provisions_of_the_Act\" >Penalties for Not Following with the Provisions of the Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#What_Are_The_Consequences_For_Not_Complying_With_Form_DIR-12\" >What Are The Consequences For Not\nComplying With Form DIR-12?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/corpbiz.io\/learning\/different-modes-of-removal-of-directors\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Are_Directors\"><\/span>Who Are Directors?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Companies\nAct of 2013 does not contain a detailed definition for directors; it has very\nsimply explained the term director under&nbsp;<em>Section\n2(34)<\/em>&nbsp;as, \u201c<em>Any person\nexercising the function of Director, by whatever name called.<\/em>\u201d<\/p>\n\n\n\n<p>So to elaborate on this, a director or board of directors\nare appointed to perform the duties and functions of the company as per the\nCompanies Act. They are entrusted with the responsibility to act in the best interest\nof the company. Therefore with time and circumstance, they work as a trustee,\nan agents and sometimes as managing partners. Directors are viewed differently\naccording to circumstances. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Types\nof Directors in a Company:<\/h3>\n\n\n\n<p>According to the provisions of <strong>the Company Act of 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup>, a company can appoint the following directors as per their requirements:<\/p>\n\n\n\n<ol><li><strong>Residential\nDirector<\/strong><\/li><li><strong>Independent\nDirector<\/strong><\/li><li><strong>Small\nShareholders Directors<\/strong><\/li><li><strong>Women\nDirector<\/strong><\/li><li><strong>Additional\nDirector<\/strong><\/li><li><strong>Alternate\nDirector<\/strong><\/li><li><strong>Nominee\nDirectors<\/strong><\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Removal_of_Directors_as_Per_Section_169_of_the_Companies_Act\"><\/span><strong>Removal <\/strong><strong>of Directors as Per <\/strong><strong>Section <\/strong><strong>169 of the <\/strong><strong>Companies Act <\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The procedure for the removal of directors from a\ncompany is outlined under Section 169 of the Indian Companies Act of 2013. As per the section, all the rights are given\nin the hands of shareholders of the company to remove the director by passing\nan ordinary resolution in a general meeting.<\/p>\n\n\n\n<p><strong><em>The steps for the\nprocedure for the removal of directors are as follows:&nbsp; <\/em><\/strong><\/p>\n\n\n\n<ul><li>Shareholders only have\nthe right to remove the directors by passing an ordinary resolution in the\ngeneral meeting.<\/li><li>A special notice has to\nbe given by the shareholders of the intention for such removal from the\ncompany. <\/li><li>After the company has\nreceived the notice, it should send the notice to all the members at least\nseven days prior fr4om the date of the meeting.<\/li><li>The company should issue\na notice of intimation to the concerned director about his removal. The\ndirector must be given an opportunity of being heard.<\/li><li>All the resolutions\npassed in a company must be filled within a period of thirty days of passing\nsuch special resolution under form MGT-14 with ROC (Registrar of Companies).<\/li><li>The draft notice, along\nwith the draft resolution to be discussed in the board meeting. <\/li><li>Prepare all the related\ndocuments, and finally the company can remove the concerned director from the\ncompany. <\/li><li>Once a director of a\nCompany has been removed from the board of directors of a company, he cannot be\nrehired again as a director in the same company. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Section_1671b_of_Companies_Act_of_2013_%E2%80%93_Removal_of_Directors\"><\/span>Section 167(1)(b) of Companies Act of 2013 \u2013 Removal of\nDirectors<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per Section\n167(1)(b), a director cannot be absent from the board meetings for a period of\n12 Months. To elaborate this, if it is found that a director is absent from all\nthe board meetings held during a period of 12 months, with or without seeking\nleave of absence from the board, the board will consider that he has vacated\nhis office as per&nbsp;<em>Section 167<\/em>. <\/p>\n\n\n\n<p>(The Companies Act of 2013 under Section 168\nprovides a comprehensive explanation of the resignation of directors, which was\nmissing from the original Act of 1956.)<\/p>\n\n\n\n<p>The biggest question here is, how to calculate 12 months\nor what do we mean by 12 months? The period of 12 months is not the same as\n\u201cthe financial year\u201d or \u201cthe calendar year. For this, one has to consider the\ndefinition of \u2018month\u2019, which has been defined by the General Clauses Act of\n1897. According to the act, a month means \u201c<em>A month reckoned according to\nthe British calendar<\/em>.\u201d<\/p>\n\n\n\n<p>Following are the steps of procedure to remove a director\nas per Section 167(1)(b) of the Companies Act: <\/p>\n\n\n\n<ul><li>Step one in the process includes, issue a notice of\nintimation to the concerned director about his removal.\nThe director must be given an opportunity of being heard.<\/li><li>Step two in the process includes, file the form\nDIR-12.<\/li><li>In the final step of the process, complete all the\nrelated responsibilities and concerned <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Removal_of_Directors_by_the_National_Company_Law_Tribunal\"><\/span>Removal of Directors by\nthe National Company Law Tribunal <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The company has to make\nan appeal to NCLT to provide them relief from oppression and mismanagement of a\ncompany\u2019s affairs by the concerned director(s). The appeal has to be made in\naccordance with <em>Section 241<\/em> of the\nCompanies Act of 2013.&nbsp; <\/p>\n\n\n\n<p>The tribunal will\ninvestigate in the matter and, if satisfied, will order for the removal of directors\nfrom the board of directors of the company. The process of such removal of\nDirectors has been mentioned under <em>Section\n242<\/em> of the Companies Act of 2013. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_The_Exceptions_To_The_Removal_Of_Directors\"><\/span><strong>What <\/strong><strong>Are The Exceptions To The Removal Of Directors? <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The exception for the\nremoval of a director from a company are as follows:<\/p>\n\n\n\n<ul><li>A director who has been appointed by the tribunal;<\/li><li>A company cannot remove director(s) from the company\nin a case where the company has exercised the option of appointing a total of\n2\/3rd numbers of directors.&nbsp; <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Are_There_Any_Preconditions_Before_Removing_A_Director\"><\/span><strong>Are <\/strong><strong>There Any Preconditions Before Removing A Director? <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Yes, the company act of 2013 has\ndeliberately mentioned that directors should be given an opportunity to be\nheard before their removal.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Penalties_for_Not_Following_with_the_Provisions_of_the_Act\"><\/span><strong>Penalties <\/strong><strong>for Not Following with the Provisions of the <\/strong><strong>Act <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Suppose a company fails to\ncomply with any provisions of <em>Section 169<\/em>\nof the act. In that case, the company, as well as the officer(s) of the company\nwho is in default, is liable to a fine of INR Fifty Thousand and, in case of\ncontinuing failure, with a further fine of INR Five Hundred for each day during\nwhich such failure continues, subject to a maximum of INR Three Lakhs in case\nof a company and INR One Lakh in case of an officer who is in default.<\/p>\n\n\n\n<p>Also, all the offences\ncommitted by any person under <em>Section 169<\/em>\nof the Companies Act of 2013, read with the <em>Rule\n23<\/em> of the Companies (Management and Administration) Rules of 2014, are\ncompoundable in nature under Section 441 of the Companies Act of 2013.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_The_Consequences_For_Not_Complying_With_Form_DIR-12\"><\/span>What Are The Consequences For Not\nComplying With Form DIR-12? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>All the companies that are incorporated as per Indian laws (irrespective\nof the fact whether new or existing) are\nrequired to comply with the rules regarding eform DIR-12. Under this\nform the company has to furnish the information regarding the appointment or\nthe removal of the director as per the Section\n7(1) (c), Section 168 and Section 170 (2) of the Companies Act of 2013 along\nwith Rule 17 of Companies (Incorporation) Rules and Rule 8, Rule 15 and Rule 18\nof Companies (Appointment and Qualification of Directors) Rules of 2014. <\/p>\n\n\n\n<p><strong><em>A company is required to file e-form DIR-12\nwithin a period of thirty days from the date of such removal, but if the\ncompany fails to comply with this, it may attract the following penalties: <\/em><\/strong><\/p>\n\n\n\n<ul><li>If it is\nfiled within a period of 31 days to 60 days: twice the government fees<\/li><li>If it is\nfiled within a period of 60 days to 90 days: 4 times the government fees<\/li><li>If it is\nfiled after 90 days: 10 times the government fees<\/li><li>If it is\nfiled after 180 days: 12 times the government fees and will be booked for the\ncompounding offence as well<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><strong><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In the real sense, a direct plays many roles in the company; he can be\nan agent, a trustee, or the managing partner. The function keeps on changing\nwith different circumstances. A company&#8217;s director is required to act\nresponsibly in the best interest of the company. It is said that a director has\na fiduciary relationship with the company and as well the shareholders of the\ncompany. They are appointed as per <em>Section 160<\/em>&nbsp;of the Companies\nAct of 2013.&nbsp;<\/p>\n\n\n\n<p>The Act of 2013 also provides the procedure for the removal of directors from the company. The removal of directors is the inherent right of the shareholders. If it is found that a director is unprofessional or unfit to hold his position as a director of the company, he will be removed by filing form DIR-12. Though the removal of a director is a very sensitive activity, therefore the, due care and diligence ought to be exercised. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/procedure-for-the-removal-of-director-online\/\">Companies Act 2013 Provides Procedure For The Removal Of The Director<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Boards are always considered as the power centres of a corporate entity. Therefore every company that has been incorporated as per the rules of the Company Act of 2013 or the Limited Liability Partnership Act is required to maintain a minimum number of directors in the company. These are two in the case of a [&hellip;]<\/p>\n","protected":false},"author":48,"featured_media":51657,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[369],"tags":[264],"acf":{"service_id":"328"},"authorName":"Astitva Kumar","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image-27.jpg","authorDescription":"Astitva Kumar is an advocate by profession and has completed her BBA. LLB from IP University. She is an avid reader, researcher, and legal writer. Her areas of interest include mediation, conflict resolution, finance, cyber laws, and taxation.","postViews":5090,"readingTime":6,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51653"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/48"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=51653"}],"version-history":[{"count":2,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51653\/revisions"}],"predecessor-version":[{"id":51659,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51653\/revisions\/51659"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/51657"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=51653"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=51653"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=51653"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}