REMOVAL OF A DIRECTOR
- Shareholder Authority Directors can be removed by an ordinary resolution passed by shareholders, even if the director objects.
- Advance Notice: At least 28 days’ written notice is usually required before the resolution is voted on.
- List Item #3
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Who is a Director in a Company?
The director plays a pivotal role in the Company’s growth and success. Practically, the leadership of any company, whether public or private, is in the hands of the Board of Directors. Therefore, the role of a director is very important; hence, the process of removing an existing director is also important.
Companies Act, 2013 has clearly defined the process of removal of a director, and the company must follow the process to avoid any litigation and penalty. Legal and procedural requirements must be followed during the process of removal of a director. As per section 115 of the Companies Act, 2013, a special notice must be issued by shareholders of the company or by the Board of directors before starting the process of removal of a director. The director must be heard through written representation to the company before voting by shareholders or the Board of directors.
As the removal process of directors requires legal compliance, we at Tech Munshi assist the companies in completing the process with proper expert guidance to avoid any error or omission in the documentation process and legal requirements.
A director is an individual elected to a company’s Board of Directors who manages, oversees, and makes key decisions for the company. Directors serve as trustees and agents responsible for the assets and strategic direction of the company.
Who is a director in a company?
The director is known as a part of a collective body, i.e., the Board of Directors. A Director is the one who controls, manages, and directs the affairs/ activities of a company. Directors are also referred to as the trustees/ agents of the transactions, property, assets, and money of the company.
Minimum number of directors
- Public Ltd. Companies – 3
- Private Ltd. Companies – 2
- One Person Companies – 1
Maximum number of directors
- Public Ltd. Companies – 15
- Private Ltd. Companies – 15
- One Person Companies – 15.
Types of Directors
Executive Director
Manages daily operations and business decisions.
Non-Executive Director
Provides strategic advice without direct involvement in operations.
Independent Director
A type of non-executive director with no material relationship with the company (mandatory in listed and large companies).
When can a director be removed?
1. Executive Director
A full-time director involved in the daily operations and management of the company. They play an active role in decision-making and strategy execution.
4. Residential Director
As per Indian law, at least one director must stay in India for a minimum of 182 days in a financial year. This is to ensure regulatory compliance.
7. Small Shareholders’ Director
Elected by small shareholders, this director represents their interests and ensures their voice is considered in the company's affairs.
2. Non-Executive Director
Not involved in the daily business but offers independent advice and oversight. They help ensure balanced decision-making and corporate governance.
5. Independent Director
A non-executive director with no financial or business ties to the company, ensuring unbiased and objective decisions. Mostly appointed in listed companies.
8. Additional Director
Appointed by the board between two Annual General Meetings (AGMs), an additional director holds office until the next AGM.
3. Managing Director (MD)
The highest-ranking executive director responsible for overall management and performance. Appointed by the board, they act as the link between the board and the company.
6. Women Director
Every listed company and certain public companies must appoint at least one woman director to promote gender diversity on the board.
9. Nominee Director
Appointed by a stakeholder (like a bank, investor, or government) to represent their interests in the company.
When can a director be removed?
There are several cases a director can be removed, those are
- If they are found to be disqualifying/ exploiting any mandatory requirement under the Companies Act, 2013
- If the director is absent from the board meetings of the company for more than 12 months
- If they enter into contracts against section 184 of the Companies Act, 2013
- If they are stated as disqualified by court order or a tribunal
- If they are convicted by a court for an offense or imprisoned for more than 6 months
- They are failing to comply with the terms and protocols outlined in the Companies Act of 2013.
- If they want to resign from the position of their own will.
Procedure for Removal of the Director
- A notice shall be given to all directors at least 7 days before stating the removal of a director.
- A resolution for organizing an Extraordinary General Meeting (EGM) along with the resolution for the removal of the director shall be circulated at the Board Meeting.
- In the board meeting, the members of the Board will discuss and decide the basis to conclude whether the director should be removed or not.
- Before concluding and passing the resolution, the concerned director (who is proposed to be removed) is given a chance to present or state anything in his favor (if any)
- After the resolution gets finalized and passed, the forms, namely Form DIR-11 and Form DIR-12, are required to be filed in the case. The director is required to file the form DIR-11, while the company files form DIR-12 with the respective ROC along with the passed Board Resolution.
- Lastly, the name of the proposed director who was to be removed gets withdrawn from the Company’s Master Data on the Ministry of Corporate Affairs website.
Ans – No, a private limited company can be incorporated with a minimum of two directors and two members/shareholders.
Ans – Yes, Class-3 Digital signatures of all proposed directors are required for incorporation into the company.
Ans – No. Aadhar card is not considered as valid address and identity proof of Directors.
Ans –Once a company is incorporated, the first thing to do is to open a current company account. After opening a current account, all the shareholders should deposit their portion of paid-up capital in the current account within 180 days of incorporation. After depositing the same in the current account, the INC- 20A form is filed as commencement of business. The first auditor appointment is also to be done within 30 days of company incorporation. Auditor appointment is done in the first Board meeting, which is held within 30 days of incorporation.
Ans – Once the Company’s name is approved; we must file Part B of the Spice+ form with all required attachments. If Forms and Documents are properly filled and submitted, MCA approves the company within 7 working days usually.
Ans – The proposed company name should be unique and not identical to the existing company name. Apart from this, MCA has provided a list of rules that should be considered before finalizing the Company’s Name.