In every company, directors play a key role in managing daily operations and making important decisions. However, there may be situations when a company needs to remove a director. This can happen due to legal reasons, poor performance, misconduct, or even voluntary resignation.
Removing a director is a legal process and must be done as per the provisions of the Companies Act, 2013. In this article, we will discuss the reasons for removing a director and the step-by-step process to do it, in simple and easy-to-understand language.
Who is a Director?
A director is an individual appointed to manage the company’s affairs. They act on behalf of shareholders and are responsible for running the business in a lawful and fair manner. Directors can be executive (involved in daily operations) or non-executive (providing guidance and oversight).
Reasons for Removing a Director
A company may need to remove a director for several reasons:
- Absence from board meetings – If a director does not attend any board meetings for 12 consecutive months, they can be removed under Section 167 of the Companies Act.
- Misconduct or fraud – If a director is involved in fraud, misuse of power, or other serious misconduct, the company may choose to remove them.
- Loss of trust or poor performance – If a director fails to perform their duties properly or acts against the interests of the company.
- Disqualification under law – If the director is disqualified due to reasons such as insolvency, conviction by a court, or non-filing of returns for a long period.
- Voluntary resignation – A director can resign on their own, and the company must then file the necessary documents to remove their name from the official records.
Types of Removal
There are two major ways to remove a director:
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Removal by Shareholders (Section 169 of the Companies Act, 2013)
This method is used when shareholders want to remove a director before their term ends. It applies to directors who are not appointed by the Central Government or through the Tribunal.
Steps:
- A notice for removal is sent by a shareholder holding at least 1% of the total voting power or shares worth Rs. 5 lakhs.
- The company must send this notice to all members and the concerned director at least 7 days before the meeting.
- A general meeting is held, and a resolution is passed by a simple majority.
- The company files Form DIR-12 with the Registrar of Companies (ROC) within 30 days of removal.
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Automatic Removal (Section 167)
In this case, a director is automatically removed without a resolution if they:
- Fail to attend any board meeting within 12 months
- Become disqualified under the Companies Act
- Are convicted by a court for a crime involving moral turpitude
The company must file Form DIR-12 to update the ROC about the change.
Documents Required
To remove a director, the company usually needs the following documents:
- Notice of the meeting and board resolution
- Copy of special or ordinary resolution (if passed)
- Attendance record showing director’s absence (if applicable)
- Resignation letter (in case of voluntary resignation)
- Form DIR-11 (if the director files resignation) and DIR-12 (filed by the company)
Things to Keep in Mind
- The director must be given a fair chance to explain their side, especially in cases of removal through a shareholder resolution.
- For companies with multiple directors, ensure that after removal, the company still meets the minimum number of directors as per law.
- Always update MCA records and other legal registrations after the removal is complete…!
Conclusion
Removing a director from a company is a serious decision and must be handled with care and legal compliance. Whether the reason is absence, misconduct, or other reasons like voluntary resignation, following the correct procedure measures ensures the element of transparency and protects the interests of the company and its stakeholders. With proper documentation and timely filings, the process can be completed smoothly through the online MCA portal.
