Remove Director

Introduction

Directors are vital in the running and administration of a company. Nevertheless, a director should be dismissed if they have misbehaved, are inactive, are in disagreement, and so on.

Removal of a director in India is regulated by the Companies Act, 2013, which is to be undertaken cautiously to adhere to the provisions of the law and procedure.

This article discusses all the information you should know about the removal of a directors types, reasons, legal provisions, procedure, documents required, and consequences.

Who is a Director?

A director is a person who is nominated into the board of a company to oversee its affairs and is charged with making major decisions. They perform as fiduciaries and are supposed to serve the company in the best interest.

Legal Provisions for Removing a Director

The process is governed by the following sections of the Companies Act, 2013:

• Section 169 : Removal of director by shareholders

• Section 167 : Vacation of office of director

• Section 168 : Resignation of director

• Section 164 : Disqualification of director

Types of Directors Who Can Be Removed

• Executive Director

• Non-Executive Director

• Nominee Director

• Managing Director

• Whole-Time Director

• Additional Director

Note: A director appointed by the Tribunal or under proportional representation cannot be removed under Section 169.

Common Reasons for Removal of a Director

• Misconduct or fraud

• Conflict of interest

• Non-participation in board meetings

• Criminal conviction

• Violation of company policies

• Loss of confidence or trust

• Mental or physical incapacity

• Bankruptcy or disqualification under Section 164

Modes of Removal of a Director

Resignation by the Director (Voluntary Removal)

• The director gives a letter of resignation to the board.

• The company files Form DIR-12 with the ROC within 30 days.

• The director may also file Form DIR-11 (optional but recommended).

Automatic Vacation of Office (Under Section 167)

A director automatically vacates the office in case of:

• Disqualification under Section 164

• Absence from all Board meetings for 12 months

• Conviction and sentence of more than 6 months

• Failure to disclose interest in contracts

• Being declared insolvent

• Company files Form DIR-12 to update ROC.

Removal by Shareholders (Under Section 169)

• Step 1: Special Notice

1. A member/shareholder sends a special notice to the company at least 14 days before the meeting.

• Step 2: Board Meeting

1. The board calls for a General Meeting to pass an ordinary resolution.

2. Notice of the resolution is sent to all members at least 21 days before the meeting.

• Step 3: Intimation to the Director

1. A copy of the special notice must be sent to the concerned director.

2. The director has the right to hear the meeting.

• Step 4: Conduct General Meeting

1. Members vote on the resolution.

2. If the majority votes in favor, the director is removed.

• Step 5: File ROC Forms

1. Submit DIR-12 to the Registrar of Companies (ROC) within 30 days.

2. Attach relevant resolutions and minutes of the meeting.

Documents Required for Removal of Director

• Resignation letter (if applicable)

• Special notice by shareholder (under Section 169)

• Board resolution and notice of general meeting

• Shareholders’ resolution (ordinary)

• Attendance and voting records

• Minutes of the meeting

• Form DIR-12

• Proof of intimation to the concerned director

Rights of the Director Being Removed

• Right to receive a copy of the special notice

• Right to make a representation in writing

• Right to be heard at the general meeting

Consequences of Removal

• The director ceases to hold office from the date of resolution.

• No compensation is payable unless stated in the contract.

• ROC records are updated to reflect the removal.

• It may affect the company reputation or internal management if not handled carefully.

Things to Keep in Mind

• Deletion should be done in due process under the law.

• Do not do it as a matter of course to avoid lawsuits.

• See legal advice in case of a contractual obligation.

• Keep shareholders and directors in the know.

Conclusion

Removing a director is a serious action and must be taken with full legal compliance. Whether the removal is voluntary (resignation) or initiated by the company or shareholders, the company must follow the proper procedure under the Companies Act, 2013, to ensure a smooth and dispute-free process.

If handled properly, it allows the company to maintain good governance, accountability, and effective leadership.

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.