Removal Of A Director
Removal of a Director from a Company – A Guide by NR Filing
Directors are responsible for managing a company’s day-to-day affairs, while shareholders are its owners. At times, a director may be removed for underperformance, non-compliance, or misconduct—or they may resign voluntarily. Director removal is a serious corporate step that must align strictly with the Companies Act, 2013 and other applicable regulations. This process should always be conducted with transparency, fairness, and adherence to due process.
NR Filing offers expert assistance in the removal or resignation of directors, ensuring full legal compliance and minimal disruption to business operations. Our team of professionals simplifies this complex procedure with accurate documentation and timely filings. Contact us today to get started.
Common Reasons for Director Removal
Under the Companies Act, 2013, every private limited company must have a minimum of two directors. Removal may occur under the following circumstances:
- Disqualification under Section 164 of the Companies Act.
- Absence from board meetings for 12 consecutive months.
- Breach of trust under Section 184 (related party transactions).
- Prohibition via court or tribunal orders.
- Conviction resulting in imprisonment for six months or more.
- Persistent non-compliance with legal obligations.
- Voluntary resignation from the directorship.
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There are three primary methods by which a director may be removed:
- Resignation: When a director steps down voluntarily.
- Automatic Vacation: Due to non-attendance at board meetings for 12 months.
- Shareholder Resolution: Removal through an ordinary resolution passed by the shareholders.
The removal of a director is governed by:
- Section 169 – Outlines the process for removing a director by resolution.
- Section 115 – Deals with the issuance of special notice for such resolutions.
- Section 163 – Pertains to proportional representation of directors.
- Rule 23, Companies (Management and Administration) Rules, 2014 – Provides procedural guidelines.
- Special Notice: Shareholders must issue a special notice to the company.
- Notice to the Director: The concerned director must receive a minimum 14-day notice.
- Opportunity to Respond: The director has a right to make a representation.
- Restriction on Reappointment: Once removed, the director cannot be reappointed immediately.
- Form DIR-12 Filing: Mandatory filing with the Registrar of Companies to update the company’s records.
When a director voluntarily resigns:
- The resignation becomes effective from the date the company receives it or a later date specified in the notice.
- The director remains liable for any offences committed during their tenure.
- The company must:
- Call a board meeting (as per Section 173 and SS-1).
- Pass a resolution acknowledging the resignation.
- File Form DIR-12 within 30 days.
- Update internal records and the statutory register.
- The resigning director may independently file Form DIR-11 with the ROC.
Removal Due to Absence from Meetings
If a director fails to attend board meetings for 12 months:
- Their office is deemed vacant under Section 167.
- The company must file Form DIR-12.
- MCA records are updated accordingly.
Shareholder-Initiated Director Removal
To remove a director via shareholder resolution:
- Board Meeting: Called with 7 days' notice to all directors.
- Resolution for EGM: Pass a board resolution to convene an Extraordinary General Meeting.
- Issue EGM Notice: Give shareholders at least 21 days’ notice.
- EGM Voting: The removal resolution is passed by a simple majority.
- Right to be Heard: The director must be allowed to explain their position before the vote.
- Filing Requirements: Submit Form DIR-11 (if applicable) and DIR-12 to the ROC.
Late Filing Penalties – Form DIR-12
Failure to file Form DIR-12 on time may result in:
- 31–60 days: 2x government fees
- 61–90 days: 4x government fees
- 91–180 days: 10x government fees
- Beyond 180 days: 12x government fees and potential legal action
Timely compliance is crucial to avoid heavy penalties.
Post-Removal Compliance and Impact
Removing a director can have both administrative and reputational implications:
- The director ceases to hold any authority in the company.
- Legal challenges can arise if procedures aren't correctly followed.
- Updates are required under various regulatory laws:
- GST
- EPF/ESI
- Factories Act
- Shops and Establishment Act
- Labour Laws and Industry-Specific Acts
NR Filing is your trusted compliance partner for director removal and resignation services. Here's why businesses choose us:
- Professional Expertise: Experienced legal and compliance specialists.
- Complete Legal Compliance: Every action aligned with the Companies Act.
- Seamless Execution: From document drafting to MCA filings.
- Tailored Solutions: Custom strategies based on your business needs.
- Transparent Guidance: We ensure you understand each step of the process.
