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Procedure to Appoint or Remove a Director of a Private Limited Company 2024

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Last Updated on June 25, 2024 by Kanakkupillai

Directors are appointed by original investors and named in association articles. The nominated person must sign and agree to take the position. It is usually done at meetings. An existing director can fill in if need be. The Board of Directors in the general meeting acts for a Director called the original director during his absence for not less than three months. In most cases, the alternate directors are appointed for a person who is a non-resident Indian or for the foreign collaborators of a company.

Most commonly, appointments of directors by the shareholders at the Annual General Meeting (AGM), or in extreme circumstances, at an Extraordinary General Meeting (EGM). A resolution for the appointment is put to a vote and passed if a majority of shares are voted in favor.

A Company has the authority to remove a Director by passing an Ordinary Resolution, given the Director was not appointed by the Central Government or the Tribunal. A Board Meeting will be called by giving seven days’ notice to all the directors. If the shareholders of a public company want to remove a director, they must first give notice of their intention. Shareholders must make this notice to move a resolution for a director’s removal at least two months before the shareholder’s meeting. Shareholders must also give the director notice as soon as practicable.

Introduction

Directors are the higher officials of the company who are responsible officials of the management of the business dealings of a company and make every important decision as to its operation on a daily basis for the benefit of the company and shareholders. The directors of the company are collectively known as the Board or Board of Directors. As per the Companies Act, 2013, every company should have a minimum of two directors in the case of a private company 3 directors for a public company, and one director for a One Person Company. Adding and removal of the director in a company must be done with a certain procedure, such as duly justified and approved by the Board of Directors of the company or shareholders of the company.

How to Appoint a Director to the Company?

A new Director can be appointed to the company by the Board of Directors by passing an ordinary resolution in an Extraordinary General Meeting or an Annual General Meeting. It is mandatory for any individual who is to be added as a Director of the company for the first time to get a DIN or Director Identification Number issued by the Ministry of Corporate Affairs after submitting the necessary documents.

Minimum Directors in a Company

As per the law, a minimum of 3 directors in the case of a public limited company, a minimum 2 directors for a private limited company, and a minimum 1 director in the case of a one-person company. A company can have a maximum number of directors of a private company is 15. The company could appoint one or more directors by passing a special resolution in its Board meeting or general meeting.

Types of Directors in a Private Limited Company

  • Executive Director: A full-time working director with a higher province towards the organization. Non-Executive Directors: Non-working directors, are not involved in the everyday working of the company but take part in the policy-making or planning process.
  • Managing Directors: Holds a substantial ability to make decisions, and handle and guide other members of the company.
  • Independent Directors: Expertise and experienced directors who give expert advice to the board when needed but have no direct relationship with the company.
  • Residential director: A director who resides in India for at least 182 days. A company must hold one residential director.
  • Small Shareholder Directors: They are the members of the company who can appoint or remove the director in a listed company.
  • Women Directors: The companies who have a paid-up capital of Rs. One hundred crores or hold their securities listed on the stock exchange or have a turnover of more than Rs. Three hundred crore must have a woman director.
  • Additional Directors: An individual who can take the position and act as a director until the next Annual General Meeting.
  • Alternate Director: An alternate director comes on board when a director is absent for more than 90 days or three months for a temporary period.
  • Nominee Director: The central government or the Shareholders or third parties appoint them. when there is sober mismanagement or the board members misuse their responsibility.

Process of Adding Directors of a Company

1) The first step to appoint a director in a company is to take a consent letter from the other directors of the company in DIR-2 along with ID and address proof. Apart from this, other forms such as disclosure of interest in MBP-1 DIR-8 declaration should be gathered from the proposed Directors.

2) Next is to analyze the AoA or Articles of Association of the company to understand the procedure to add a director, whether the appointment of a director can be done only by conducting a meeting of the shareholders or whether the Articles of Association holds the option to the Board to appoint a Director who can be affirmed in the next General Meeting.

Process of Adding Directors of a Company

3) In a case like the director of the company can only be appointed by the shareholders, then the Directors have to conduct a shareholders meeting, depending on the time, it can be the company’s Annual General Meeting or the Extra Ordinary General Meeting. Notice for such a meeting should hold all the details for the concern process, such as the agenda of appointment of the Director with the consent letters and other needed documents.

4) In another case, like, director of the company can be appointed by a Board Meeting or by passing circulation after resolution. In both cases, a Notice for such a meeting should hold all the details for the concern process, such as the agenda of appointment of the Director with the consent letters and other needed documents.

5) Once after passing the resolution in either of the above cases, an appointment letter is prepared for the confirmed director and then filing of Form DIR -12 has to be done within the time period of 30 days of the passing of the resolution.

How to Remove a Director from a Pvt Company?

Removal of a director from a company can be done by passing an ordinary resolution in an Extraordinary General Meeting or an Annual General Meeting. Generally, Ordinary resolutions can be passed based on the simple majority of the board members.
A casual vacancy in the management level of a company caused by the removal of a director from a Private Limited Company must be filled by adding or appointing a new director within 6 months of time from the date of resignation or removal of the former director.

The removal of a director from the company can be voted out for in the General Meeting of the company by the shareholders except in cases of appointment by the central government. A private limited company by mandates of The Companies Act, 2013, needs to have a minimum of 2 directors before the commencement.
There are three possible cases in which the removal of a director of a company happens:
  • The Director himself gives his resignation
  • Removal of a Director suo-moto by the Board
  • The Director does not attend three continuous Board Meetings of the company

1) The Director himself submits his resignation

The concerned director of the company gives his resignation to the Board. In this type of situation, the following procedure will be done to remove the name of the director from the register of directors:

  • The company will conduct a Board Meeting by circulating seven days of clear notice to the board members of the company.
  • In the Board Members meeting, they will discuss and decide on whether to take the resignation of the director or not.
  • Once the Board members accept the resignation of the director, a Board resolution is passed accepting the resignation of the director in the following format:

“RESOLVED THAT the resignation of Mr. ABC be and is hereby accepted with immediate effect”
“FURTHER RESOLVED THAT the Board meeting places on record its admiration and appreciation for the assistance and counseling furnished by Mr. ABC during his incumbency as Director of the Company”
“RESOLVED FURTHER THAT the directors of the company be and are hereby collectively passed a resolution to do all the deeds, acts, and things which are the important requirement to the resignation of the aforesaid individual from the directorship or director position of the Company”

  • Form DIR–11 has to be filed after the passing of the resolution by the outgoing director along with the Board Resolution, proof of presenting the resignation letter, and a copy of the resignation letter.
  • Filing of DIR–11 is the responsibility of the director and filing form DIR–12 is the company’s responsibility both forms have to be submitted to the Registrar of Companies along with the needed documents such as a Resignation letter and the Board Resolution.
  • After submitting all the forms, the name of the director will be removed formally from the directors’ private limited company registration details on the Ministry of Corporate Affairs website.

2) To remove a Director of the company suo-moto by the Board

A Company has the complete power and authority to remove a Director by authorizing an Ordinary Resolution, given the Director was not ordained by the Tribunal or the Central Government.

  • A Board Meeting will be conducted by prescribed seven days of clear notice to all the directors. A special notice will be passed to the directors stating the details about the removal of the director of the company.
  • A resolution for the agreeing of an extraordinary general meeting will be passed on the day of the Board Meeting, with the resolution for the removal of the director capable of the approval of the shareholders of the company.
  • A general meeting will be conducted with 21 days’ clear notice. The members will be asked to vote on the concerned matter in the meeting. The resolution will be passed in favor of the majority of the decision.
  • An opportunity to be heard will be provided to the director of the company before passing of the resolution.
  • Once the resolution is passed, the same procedure will be conducted, and the forms DIR – 11 and DIR – 12 will be submitted along with all needed documents of the Board Resolution, Ordinary Resolution.
  • After submitting the forms, the name of the director will be removed formally from the Ministry of Corporate Affairs website.

3) The director does not attend three Board Meetings of the company in a row

According to section 167 of the Companies Act, 2013 if a Director of the company does not attend a Board Meeting for 1 year or 12 months, starting from the day on which he was absent for first board meeting and continuing the same even after sending due notice for all the meetings, it will be viewed as that he or she has vacated the office and a Form DIR – 12 will be filed on his name and his name will be removed formally from the Ministry of Corporate Affairs.

Conclusion

Director appointments and resignations are a constant reality for any company. To appoint or remove a director without a corporate structure and shareholders’ agreement, one must adhere to statutory processes.

Contact +91 7305 345 345 if you need advice on the terms of appointment and removal or how to become a firm director. When you looking for Appointment and Resignation of Director India, Kanakkupillai is the One-step Solution for you!

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