Reason for Director Removal
- Incurring any disqualifications as specified under the Companies Act.
- Prolonged absence from board meetings spanning over 12 months.
- Entering into contracts or agreements contrary to the provisions outlined in Section 184 of the Companies Act.
- Receiving a disqualification order from a court or tribunal.
- Being convicted by a court for an offense and sentenced to a minimum of six months in prison.
- Failure to adhere to the terms and regulations stipulated in the Companies Act of 2013.
- Voluntarily resigning from their position.
NGO (Non-Government Organization) is an organization that works for non-profit/ charitable purposes. An NGO established as Section 8 company under the Companies Act, 2013 (‘Act’) is governed by the Ministry of Corporate Affairs (‘MCA’) whereas the NGO registered as a trust or society is governed by the registrar of state under the State Government
Methods for Director Removal from a Company
Resignation by Directors: This method involves directors resigning voluntarily from their positions.
Director Absence from Board Meetings: This approach is used when a director fails to attend board meetings for 12 months, triggering their removal.
Shareholder-initiated Removal: This method is employed when the shareholders of a company vote to remove a director from their position.
Procedure for Director Removal
Director's Voluntary Resignation
Mandatory Requirements
The effective date of a director's resignation is either the date the company receives the notice or a later date specified by the director within that notice, depending on which comes last. Additionally, a director who resigns remains responsible for any legal infractions during their time in office.
The following Procedure is to be followed.
- Schedule a Board of Directors Meeting: Following Section 173 and Secretarial Standard-1 (SS-1), a board meeting should be arranged.
- Notification of Board Meeting: After receiving a resignation letter, the company must send out a board meeting notice to all directors at their registered addresses no later than 7 days before the meeting. In urgent situations, a shorter notice period is permissible.
- Preparation of Meeting Documents: The meeting notice should accompany the agenda, explanatory notes, and a draft resolution.
- Conduct the Board Meeting: The board should convene to acknowledge the resignation letter submitted by the director.
- Delegation for ROC Filings: Assign the Company Secretary, CFO, or director to submit the necessary forms and documentation to the Registrar of Companies.
- Disclosure Requirements for Listed Companies: Public companies must report the resignation to the stock exchange promptly, adhering to specific timelines based on the nature and origin of the event or information, as mandated by Regulation 30 & 46(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
- Distribution of Draft Minutes: Within 15 days following the board meeting, draft minutes should be sent to all directors via hand delivery, speed post, registered post, courier, or email for their review, per the established procedures for minute preparation and approval.
Submission of Form DIR-12 to the Registrar of Companies (ROC):
Within 30 days following the receipt of the director's resignation notice, the company must inform the ROC by submitting Form DIR-12, accompanied by the following documents:
- A certified true copy of the Board Resolution.
- The resignation notice from the director.
- Proof of the director's cessation from the board.
Submission of Form DIR-11 by the Resigning Director:
The director who has resigned can send a copy of their resignation to the Registrar of Companies (ROC) using Form DIR-11 within 30 days from the date of their resignation. This submission should include:
The resignation notice that was submitted to the company.
- Evidence of the notice being dispatched.
- An acknowledgement from the company confirming receipt of the resignation.
Director Absence from Board Meetings for 12 Months
When a director fails to attend any board meetings for twelve months, even without formally requesting a leave of absence, they are considered to have vacated their position according to Section 167. The following steps outline the procedure for such situations:
- Acknowledgement of Vacancy: Recognize that the director's position is deemed vacated under the applicable corporate governance laws, such as Section 167, which addresses the automatic vacation of a director's office due to non-attendance.
- Filing of Form DIR-12: The company must then file Form DIR-12 with the Registrar of Companies (ROC). This form serves as a notification of the director's resignation or removal, including cases where the position is vacated due to absence from meetings.
- Update on MCA Database: After the necessary formalities are completed, including the filing of Form DIR-12, the director's name will be officially removed from the Ministry of Corporate Affairs (MCA) database, reflecting the vacancy of their position.
Director Removal by Shareholders
- Board Meeting Notice: Begin by scheduling a Board Meeting, providing a minimum of seven days' notice to all directors. This notice should include the agenda item for the proposed removal of the director.
- Resolution to Convene an EGM: At the Board Meeting, pass a resolution to hold an Extraordinary General Meeting (EGM). Also, propose a resolution for removing the director, subject to shareholder approval at the EGM.
- Issuing EGM Notice: Send out notices for the EGM to all shareholders, ensuring a precise notice period of 21 days, which excludes the day the notice is sent and the day of the meeting.
- Voting at EGM: During the EGM, present the resolution for the director's removal to the shareholders for a vote. If the majority supports the resolution, it is passed.
- Director's Right to be Heard: Before the resolution is passed, the director should present their case or explanation to the meeting attendees.
- Filing Forms DIR-11 and DIR-12: After the resolution is passed, complete and submit Form DIR-11 (by the outgoing director, if applicable) and Form DIR-12 (by the company) to the Registrar of Companies (ROC), along with the necessary attachments including the resolutions passed.
- Update with MCA: Once the forms are successfully submitted and all procedural formalities are completed, the removed director's details will be officially removed from the Ministry of Corporate Affairs (MCA) database.