Overview on Removal of Director
Each private company should have a least of two directors, whereas a public corporation shall have a least of three directors. A Private company can remove a director if he catches any of the incompetence specified under the Act, absents himself/herself from board adherence over 12 months. It enters into agreements or arrangements against the provisions of section 184. However, it gets excluded by order of a court or Tribunal or is convicted by a court of any crime and sentenced to imprisonment for not less than six months.
About Participation in the Removal of the Director of a Company
Understandings behind Resignation of Directors
- Dispute with the Board
When many directors work commonly, a difference of opinion ought to happen. It results in hindering the overall performance of the corporation; in such a position, the directors may be removed with due considerations
- Misuse in the Company Affairs
When a director gets introduced to the illegal practices of the company, he may find himself becoming dragged into it that matches his reason for resignation. To defend the circumstances appearing out of such activities, he may be removed by due considerations.
- Suspension due to infringement
Any non-adherence, violation, or defaults on the director’s end can lead him into trouble.
- The recession of nomination
It is only appropriate to the Nominee directors who primarily get appointed by the NBFC’s investors on the BOD. Once the transaction between the company and entity is complete, the Nominee director can resign, or he may also leave after the removal of nomination.
What is the Eligibility Criteria to be a Director?
There are no designated qualifications, but an individual should comply with the following mentors be a director:However, according to the law, a specific natural person only can be a director of any company.
- Age Demarcation
There is no alternate fixed age for being a director, but it is essential that the person who should be competent to enter into any contract. Moreover, in a matter of 'managing director,' 'full-time' director, or 'independent' director of a recognized company, the person becomes eligible to be a director if he is of 21 years and has not reached the age of 70 years officially.
- Determination of Nationality
There is no restriction. However, there must be a minimum of one Indian director in the company.
- DIN Needed
To be eligible to be designated as a company's director, the person must get a Director Identification Number. The main intention behind having a DIN is to make assured that fake directors do no fraud, and in case anyone ventures any such criminal activity, they can be traced within this unique number.
- Limit of Valid directorship
A personality can only be a director of 20 separate companies at a time. Out of these 20 companies, only ten can be public companies.
- Unsound mind or bankrupt person
Anybody who is of unsound mind or is incompetent of making decisions on his own cannot be appointed as a director. This involves children, mentally disabled individuals, and frames with unstable mental faculties. Furthermore, insolvent people or individuals who have maintained bankruptcy claims in the court of law are disqualified from acting directors.
- Criminal background
If a personality has a criminal record and was sentenced to confinement for more than seven years or more, he cannot be a director.
- Pending overdue returns
If the individual has not met previous returns in any of the preceding years, he shall be barred from keeping the directorial position.
Recognition: Types of Director
The directors of a company change in terms of the role they play, such as managing director who runs the overall purposes of the company, executive directors who look after the day to day methods, and independent directors who assure proper governance of the company. Thereby, one company can have increased directors; nevertheless, the appointment of directors also depends on the type of business like:
Note: "If any person holds the efficiency of director in more than 10 or 20 companies before the commencement of Companies Act, then he shall have to determine the companies where he wishes to maintain or resign as the director within one year from such beginning. After that, he shall inform about his decision to the chosen companies as well as the concerned Registrar.
Why Add and Switch?
Documents needed for Removal of Director
Manner of Removal of Directors Effecting Companies
In cases to remove a director from business, he/she should not have abided by the words and rules according to the 'Companies Act, 2013', or can himself come up with resignation or drops to attend the board meeting for three consecutive times in a year.
Incident 1 - Suo-moto via the Board
Stockholders hold the power to remove a director, as per Section 169 of the 'Companies Act 2013'. The method can be done by passing an ordinary decision in a general meeting, besides in the case, the Director was not appointed by the Central Government or the Tribunal.
Incident 2 - Self-submission by a director
The Director of the Company may wishes to resign from the post of a director, then he/she can continue by passing a resolution firstly to the Company
The resignation of a director/managing director, companies act 2013, asserts that the Company has special duties and obligations to fulfil after.
Incident 3: Absence of the Director in three consecutive Annual board Meetings
Provisional Aspects: Removal of Director under Companies Act 2013
1. Section 169(1)
2. Section 169(2)
- Special notice is needed for a resolution to remove a director or to designate somebody in his position.
3. Section 169(3)
- The Company should attempt to send the Special notice along with the intention of removal to Director along with opportunity of being heard is provided to him at the meeting.
4. Section 169(4)
- For representation, Director should give it in writing to the Company and request to notify it to the members.
- if Tribunal is satisfied, Company shall not assign the representation and shall not read it out at meeting
5. Section 169(5)
- The opening generated by the removal of Director can be filled by the same meeting if 'special notice' is given under 'section 169(2)'.
6. Section 169(7)
- Director removed cannot be reappointed as Director to fill the casual vacancy.
7. Section 169(8)
- Director discharged shall be entitled to payment as per the terms of contract or terms of his employment, if any.
- Director can be removed under any additional provisions of this act.
8. Rule 79 of NCLT Rules 2016
- The Company or any other personality who claims to be aggrieved may make an appeal to the Tribunal in Form 'NCLT-1'.
- File Form DIR-12 within '30 days' from the date of General Meeting with following attachments:
Consequences of not filing the form DIR-12
In 30 days of date of the resignation, if the company fails to or doesn’t file the 'form DIR-12', the below mentioned penalty will be applied.