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Posted on April 27, 2021
As per Company Act, the Process of removing a director of the company can be done by the shareholders of the company. If the director of the company is not active or if he/she is not attending any of the board meetings for about one year or twelve months even after sending several intimations or notices, then the company has the right to eliminate that particular director even before his or her term expires.
Here in this article, you can find the various procedures for the removal of a director from the company. Before that, let’s discuss the role of the directors in the company.
A director in the company is a crucial role as they are the responsible person for all the business operations done in the company. They are the liable person for the implementation and determination of the company’s policy. Apart from these, there are several important business affairs and operations that directors are supposed to manage and handle. therefore, it’s very essential for directors of the company to attend all the meetings and to participate in the company’s quintessential work.
If the director of the company is not participating in any of the company’s operations and dealings, then the role of that particular director is nothing and it is not beneficial for the growth of the company. So, it is obvious and good to remove him or her from the company.
There are three possible circumstances in which the removal of directors from the company can be proceeded. They are as follows:
- If the director didn’t attend three back-to-back board meetings of the company
- When the director submits his/her resignation to the company
- Removal of director suo-moto by the board
Procedure for removing a director from the company
Let’s begin with the case mentioned first-
1. If the director didn’t attend three back-to-back board meetings of the company in the same year. As per section 167 of the Companies Act, 2013 if a director didn’t attend the Board Meeting for 12 months, starting from the day on which he/she was absent at the first meeting even after sending him/her due notice for all meetings, it will be regarded that he/she has vacated the company.
Here you have to file Form DIR-12 on the director’s name. As a result of the removal of a director from the company, his/her name will be moved out from the Ministry of Corporate Affairs
2. When the director submits his/her resignation
By any reason, one of the directors of the company is not willing to continue with the company and want to get resigned from his/her work, then he or she can submit the resignation letter following the below-mentioned steps:
- The company will conduct a Board Meeting by granting a clear notice before seven days excluding the day on which the notice was issued.
- In the board meeting, the Board members will converse about whether to accept the resignation and it is done with each and every board member to know their view.
- If all the board members or the majority of the board members accept the resignation, they will pass a Board Resolution stating the acceptance of the resignation in an official format.
- After the Board resolution has been passed, the outgoing director needs to file Form DIR-11 along with the Board Resolution, proof of delivery and a copy of the resignation letter.
- The director is responsible for the filing of DIR-11, and filing Form DIR-12 is the responsibility of the company. Form DIR-12 has to be filed with the Registrar of Companies (RoC) along with the Board Resolution and the Registration letter of the outgoing director.
- Once all the above-mentioned forms are filed, the outgoing director’s name will be removed from the master data of the organization on the MCAs or Ministry of Corporate Affairs portal.
3. Removal of director suo-moto by the board
According to Section 169 of the Companies Act 2013, shareholders have the rights to remove the director of the company by passing an ordinary resolution after formal general meeting and there is an exception, like if the Director was appointed by the Central Government or the Tribunal, then the shareholders have no authority to remove the director.
Here are the steps involved in the removal process of a director:
- The company should conduct a Board Meeting by providing seven days of notice sent to all the directors. Moreover, an exceptional notice will be sent to the directors of the company stating the details about the removal of the director.
- Next, an extraordinary general meeting is conducted to pass a resolution for the removal of the director and to get the approval of the shareholders on the day on which the board meeting of the company will be held.
- Again, the will be general meeting by issuing 21 days of clear notice to all the directors of the company. In this meeting, the members are supposed to vote on the removal of the director matter. Depending on the majority votes, the decision will be made and then the resolution will be passed on the same.
- Actually, before the meeting and passing the resolution, the director will be provided with an opportunity for an explanation.
- And after the resolution is passed, the same procedure is followed, and the Form DIR-11 and DIR-12 has to be filed along with all needed documents like Board Resolution, Ordinary Resolution.
- Once the form has been filed, the director’s name will be removed from the MCAs or Ministry of Corporate Affairs portal.
Consequences of not filing DIR-12
It is important to file the e-form DIR-12 within 1 month or 30 days of appointment or resignation, if the company fails to do so, then the following penalty will be issued on the company:
- Need to pay one time of actual Government fees within 15 days;
- Need to pay two times of the actual government fees if it passes more than 15 days;
- And if it passes more than 30 days to 60 days, then the penalty also rises to 4 times of the actual government fees
- If it passes more than 180 days, then 10 times of the actual government fees need to be paid by the company;
- Also if the company fails to file the DIR -12 within a time period of 300 days from the date of resolution passes, then the company is applicable to pay 12 times of the actual government fees and compounding offense.
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