Remove Directors

Remove Directors from a Company

In certain cases, removing a director from a firm necessitates serious thought. A director may be removed by the company by passing an ordinary resolution before to the end of his term, as permitted by Section 169 of the Companies Act of 2013. Members who want to suggest that a director be removed must notify the firm in writing at least 14 days in advance of the meeting where the removal resolution will be discussed. Lawgical Adda is here to guide you with the director removal process:

The Accountability of a Director in a Company

A director is in charge of the daily operations of a corporation. They make crucial tactical and strategic choices that help the business accomplish its goals. The director may be responsible for the company's shareholders if there are any. The interests of the company, its employees, and shareholders must be carefully balanced by the director. The company's director may possess a strong sense of morality and the capacity to make choices that comply with the law. Below is a list of some of the most significant responsibilities of a corporate director:

1. Establish key performance indicators (KPIs) to assist employees in focusing their work.
2. Plan your corporate social responsibility efforts with other employees of the company.
3. Promote adherence to the company's legal and regulatory requirements in addition to its code of ethics.
4. Oversee the company's daily operations.
5. Ensure that the company's records are kept current and safe.
6. Verify that everything your company conducts conforms with the applicable laws at all times.
7. A strategy for managing and improving business operations and affairs.

The process for removing a director

The company's shareholders or the board of directors may start the process for terminating a director. The following are the steps that are involved in the process:

Step 1: Board Meeting: Calling a board meeting is the first step in the removal procedure. All of the company's directors must receive a notice explaining the purpose of the meeting. The notice must be sent and the board meeting must occur within seven days. The board needs to approve a resolution suggesting the director's dismissal during the meeting.

Step 2: Special Notice: The proposed resolution to remove the director must be included in a special notice that is distributed to all of the company's shareholders following the board meeting. At least 14 days must pass before the general meeting for the notice to be sent.

Step 3: Call a General assembly: To address the proposed resolution to remove the director, a general assembly must be called. At the meeting, the director needs to have a chance to be heard. A majority of the shareholders who are present and voting, but not fewer than three-fourths, must approve the resolution.

Step 4: Form DIR-12 Filing: Following the passing of the resolution, the business has 30 days to file Form DIR-12 with the Registrar of Companies. The information about the director who was fired must be on the form.

Step 5: Notification to the Director: The business needs to let the director that has been dismissed know about the resolution that was approved at the general assembly. A copy of the resolution and the explanations for the removal must be sent to the director.

What happens if the dismissed director is a shareholder as well?

Under section 168 of the Companies Act 2006, a shareholder can petition to the court to have a company director removed on the grounds that they have been involved in significant misconduct or are otherwise inappropriate to continue serving in their post.

Through the use of this statutory method, shareholders can hold directors responsible and make sure that the business is being run fairly and openly.

A potential conflict of interest exists when a director owns stock in the company, which could result in unfair discrimination against other shareholders. Therefore, before moving forward, it's critical to thoroughly assess if such an arrangement serves the interests of the business and all of its stakeholders.

What occurs after the director is fired?

The next stage for a corporation once a director is fired is to find a replacement.

Although there are other ways to accomplish this, the most popular one is to name an interim director. This individual will hold the position until a long-term substitute is identified. The interim director may occasionally be a current employee of the business. In other circumstances, an outside consultant might be hired to perform the role. Regardless of the person chosen for the position, the interim director will be in charge of managing the business's daily activities and ensuring that it continues to function properly in the event that a permanent director is not present.

Notification of Registrar 

The corporation has thirty days from the date of the resolution to remove a director to notify the Registrar of Companies (ROC). After that, the ROC will amend its documentation and strike the director's name from the list of directors.

Pay and Compensation 

A director is entitled to compensation for his loss of office if he is removed before the end of his tenure. For a period of three years, the compensation cannot beyond the amount due to the director. Nevertheless, the director forfeits all rights to compensation in the event that he is fired due to misbehaviour.

Removing a director is a major decision that needs to be carefully thought through in accordance with the law. A structure for the removal of directors is provided by the Companies Act, 2013, and in order to stay out of legal hot water, it is imperative that you comprehend and abide by these guidelines. Before approving the resolution, companies must make sure they follow the correct process for removing directors and give the concerned director a chance to be heard.

The process for removing a director is carried out in accordance with the Board of Directors' decision.

 Lawgical Adda will advise you to call a general assembly and approve the necessary resolution. We will assist you in drafting the resolution and preparing all necessary paperwork for submission. We assist you in submitting the MCA's Removal of Director form.