Removing a director from a company: Procedures

A director might wonder if shareholders can remove him or her from a company against their will.

As a simple rule, yes. Except in the following circumstances, a director may be removed by the shareholders:

  1. The Central Government does not appoint directors who are proposed for dismissal.
  2. Companies Act, 2013 Section 242 prohibits the Tribunal from appointing a director.

For the Registrar of Companies to determine whether a director should be removed, each document is scrutinized twice or thrice.

According to Sec 169 of the Companies Act of 2013, shareholders may remove a director by passing an ordinary resolution before the end of the director’s term of office.

A Company’s Legal Provisions for Removing Directors

A detailed clause for the removal of director can be found in Section 169 of the Companies Act, 2013. Shareholders of the company can remove a director who has not been appointed by a tribunal under Section 242 (before the end of the term of office, after giving them a reasonable opportunity to be heard).

Section 163 provides that two-thirds of the total number of directors must be assigned according to the principle of proportional representation unless the company exercises that option.

Removing a director by Suo Moto:

A company can remove a director suo moto by issuing a special notice in compliance with Section 169 of the Companies Act, 2013.

A Company’s Steps For Removing a Director

Below is the procedure for removing directors from the Ministry of Corporate Affairs (MCA) database.

1. Issue a Special Notice under Section 115 of the Companies Act, 2013

As a first step, special notice must be published a minimum of 14 days prior to the meeting, except for the day the notice becomes effective pursuant to Section 115 of the Companies Act of 2013.

 2. Company members are notified

After the vote is taken, the company should notify all of its members, just as it would in the event of a general meeting. The company should ensure that all shareholders are notified.

3. Notification of removal of the proposed director

In the third step, the company notifies the proposed director to be removed from the board of directors through an announcement to shareholders.

4. Removing the director requires a General Meeting

In order to expel the proposed director, the fourth step is to convene a general meeting where at least 90% of shareholders have to approve and then proceed to remove him.

5: Hearing opportunity

Prior to being removed from a company’s management and control board, a company’s shareholders must give the concerned director a chance to be heard.

6: Filling out the DIR-12 with the ROC

As soon as a shareholders meeting has been called, the next phase is to file form DIR-12 with the Registrar of Companies (ROC) within 30 days of the meeting’s conclusion.

As a conclusion

Under Section 115 of the Companies Act, 2013, shareholders can remove directors in general meetings by giving them special notice. Prior to the company proceeding with the filling and other steps, the removing director is given a fair opportunity to be heard.

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