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Removal of Director from a Company
Since removing a director is a significant corporate action, it requires strict adherence to the Companies Act, 2013, and must be handled with fairness and transparency. Whether the removal is initiated by shareholders, the board, or a judicial order, the process must align with legal provisions to protect the company’s interests.
- Expert Guidance – Our professionals specialize in corporate law and compliance.
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At Compliance Monk, we ensure a hassle-free, legally sound director removal process. Need assistance with director removal or resignation? Contact us today for expert guidance.
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Removal of Director
Reasons for Removing a Director
Company directors play a vital role in overseeing business operations, while shareholders hold ownership. However, situations may arise where shareholders choose to remove a director due to underperformance, misconduct, or regulatory non-compliance. In some cases, a director may also choose to resign voluntarily.
Under the Companies Act, 2013, a Private Limited Company must have at least two directors to remain operational. However, a director may need to be removed under the following circumstances:
- Disqualification under the Companies Act
- Failure to attend board meetings for 12 consecutive months
- Engagement in prohibited transactions under Section 184
- Legal restrictions imposed by a court or tribunal
- Conviction in a criminal case with a minimum sentence of six months
- Violation of compliance obligations under corporate law
- Voluntary resignation by the director
Methods of Director Removal
A director can be removed from a company through three primary methods:
1️. Voluntary Resignation by the Director
A director may choose to step down by submitting a formal resignation letter to the company.
2️. Automatic Removal Due to Absence
If a director fails to attend board meetings for 12 months, they are considered to have vacated their position under Section 167.
3️. Shareholder-Initiated Removal
Shareholders may pass a resolution in a General Meeting to remove a director (except government-appointed directors).
Legal Provisions Governing Director Removal
The Companies Act, 2013, outlines the legal framework for removing a director through the following key sections:
📌 Section 169 – Governs the removal of directors through shareholder resolutions.
📌 Section 115 – Outlines the procedure for giving special notice for removal.
📌 Section 163 – Ensures fair representation in director appointments and removals.
📌 Rule 23 of the Companies (Management and Administration) Rules, 2014 – Provides additional procedural guidelines.
Key Compliance Steps for Director Removal📋
To legally remove a director, a company must follow these essential steps:
1️) Issue a Special Notice – As per Section 115, a company must issue a special notice before initiating the removal process.
2️) Inform the Director – The director must receive a notice at least 14 days in advance to allow them to respond.
3️) Provide a Fair Hearing – The director must be given an opportunity to present their case before shareholders.
4️) Restrict Reappointment – Once removed, the director cannot be reappointed in the same company.
5️) File Form DIR-12 – The company must submit Form DIR-12 to the Registrar of Companies (ROC) within 30 days to officially record the removal.
Step-by-Step Director Removal Process 🛤️
📌 1. Voluntary Resignation by the Director
- The director submits a written resignation to the board.
- The board formally acknowledges the resignation.
- The company files Form DIR-12 with the ROC within 30 days.
- The director may also file Form DIR-11 with the ROC as proof of resignation.
- The company updates its Register of Directors and Key Managerial Personnel (KMP).
📌 2. Removal Due to Absence from Board Meetings
- If a director fails to attend meetings for 12 months, their position is deemed vacant.
- The company files Form DIR-12 with the ROC to update records.
- The director’s name is removed from the Ministry of Corporate Affairs (MCA) database.
📌 3. Shareholder-Initiated Removal
- The Board of Directors issues a notice for a shareholder meeting.
- A resolution is passed to call an Extraordinary General Meeting (EGM).
- Shareholders vote on the removal resolution during the EGM (Ordinary Resolution required).
- The director is given a chance to defend themselves.
- The company files Form DIR-12 with the ROC after the resolution is passed.
Penalties for Late Filing of DIR-12
If a company fails to file Form DIR-12 within 30 days, penalties escalate based on the delay:
⏳ 30–60 days: 2x the government fee
⏳ 60–90 days: 4x the government fee
⏳ 90+ days: 10x the government fee
⏳ 180+ days: 12x the government fee + potential legal action
To avoid penalties, ensure all filings are completed on time.
Consequences of Director Removal
🔹 Loss of Authority – The removed director loses all decision-making power in the company.
🔹 Legal Risks – If the removal process is not legally compliant, it may lead to lawsuits.
🔹 Impact on Reputation – Wrongfully removing a director can damage the company’s image.
🔹 Regulatory Compliance – Updates may be required under GST, labour laws, EPF, and ESI.
Why Choose Compliance Monk?
Do you need assistance with director removal or resignation? Contact us today for expert guidance.
At Compliance Monk, we ensure a hassle-free, legally sound director removal process. Here’s why businesses trust us:
- Hassle-free documentation and filing.
- Timely updates and transparent communication.
- Customized solutions to suits your company’s needs.
- Continued support throughout the process.
FAQs
1. Can a director be removed without their consent?
Yes, a director can be removed without their consent through a shareholder resolution, provided the process follows Section 169 of the Companies Act, 2013.
2. What are the common reasons for removing a director?
A director may be removed due to non-compliance with corporate laws, absence from board meetings for 12 months, disqualification under the Companies Act, engagement in prohibited transactions, or voluntary resignation.
3. What is the process for removing a director from a company?
The removal process involves:
- Issuing a special notice
- Providing the director with an opportunity to present their case
- Passing a resolution at a General Meeting
- Filing Form DIR-12 with the Registrar of Companies (ROC)
4. What happens if a company fails to file Form DIR-12 on time?
Failure to file Form DIR-12 within 30 days results in penalties, starting from twice the government fee and increasing up to twelve times the fee for delays beyond 180 days, along with possible legal action.
5. Can a removed director be reappointed?
No, a director removed through Section 169 is not eligible for reappointment in the same company.
6. What steps should a director take after resignation?
The resigning director should submit Form DIR-11 to the ROC within 30 days, along with proof of resignation and company acknowledgment.
7. How can shareholders remove a director?
Shareholders must pass an Ordinary Resolution in a General Meeting, after issuing a special notice and allowing the director an opportunity to respond.
8. Is board approval required for director resignation?
No, board approval is not mandatory for a director’s resignation. However, the resignation must be formally acknowledged, and the company must notify the ROC.
9. Can a government-appointed director be removed?
No, directors appointed by regulatory authorities or the government cannot be removed by shareholders.
10. What are the legal implications of wrongful director removal?
Improper removal can lead to legal disputes, reputational damage, and penalties for non-compliance with the Companies Act, 2013.
11. How long does the director removal process take?
The timeline varies, but once a resolution is passed, the company must file DIR-12 within 30 days to finalize the removal.