Removal of Director from a Company: Meaning, Process, Documents, Fees and Timelines
Removal of Director from a Company: Meaning, Process, Documents, Fees and Timelines
Directors are responsible for managing a company’s day-to-day operations and safeguarding the interests of its shareholders. Sometimes, a director may choose to resign for better opportunities or other personal reasons. In such cases, the company must follow a formal procedure to remove the director and appoint a replacement. Director removals can occur for various reasons, and it is essential to follow the proper legal and procedural steps. BizCatalyst Technologies offers expert services to assist with director removal, covering the required procedures, documentation, fees, and timelines.
What is the Removal of Director?
The removal of a director refers to formally relieving them from their position within the company. This can occur for a variety of reasons and through different legal procedures. Since directors hold a key position in a company, their removal involves strict compliance with legal requirements. These measures ensure that a director is not removed arbitrarily or under malicious circumstances.
Key Reasons For Removal of Directors
A director may be removed from a company for several reasons, including:
Violation of Law: If a director breaches any laws, rules, or regulations, potentially harming the company’s reputation or legal standing, they may be removed.
Negligence: Directors who fail to perform their duties responsibly or act negligently in managing company affairs can be removed from their position.
Fraud: Any director involved in fraudulent activities, either against the company or other individuals, is subject to removal to protect the company’s interests.
Different Processes for Removal of Directors
A director can be removed from their position in various ways, including:
Resignation by Director: A director may voluntarily resign from their position by submitting a formal resignation letter to the company.
Absence from Board Meetings: Under the Companies Act, 2013, a director’s position becomes vacant if they remain absent from all board meetings for 12 consecutive months, leading to automatic removal.
Decision of Shareholders: Shareholders, as the ultimate decision-making body, can vote to remove a director during a duly convened general meeting.
Procedure for Removal of Directors due to Resignation
The removal of a director through resignation is carried out in the following steps:
Step 1: Receipt of Resignation Letter
The process begins when the director submits their resignation letter to the company. The company acknowledges the receipt and prepares to initiate the formal removal process.
Step 2: Convene a Board Meeting
The Board of Directors convenes a meeting to discuss the resignation. During this meeting, the board passes a resolution accepting the resignation and authorizes the necessary steps to remove the director.
Step 3: Director’s Responsibilities
The resigning director must file Form DIR-11 with the Registrar of Companies (ROC), attaching:
A certified true copy of the board resolution
Proof of delivery of the resignation letter
Copy of the resignation letter itself
Step 4: Filing by the Company
The company submits the required documents to the ROC, including the certified true copy of the board resolution and the resignation letter.
Step 5: Removal from MCA Records
Once the ROC processes the documents, the director’s name is officially removed from the company’s master data on the MCA portal, completing the removal process.
Procedure for Removal of Directors by Shareholders
Shareholders can remove a director from the company by following these steps:
Step 1: Convene a Board Meeting
The Board of Directors should call a meeting to inform all directors about the proposed removal and to set the date, time, and venue for the Extraordinary General Meeting (EGM) of shareholders.
Step 2: Hold an Extraordinary General Meeting (EGM)
At the EGM, shareholders vote on the resolution to remove the director. If the resolution passes with the required majority, the director is officially removed from office.
Step 3: Opportunity to Be Heard
Before the resolution is passed, the director must be given a fair opportunity to present their case and be heard regarding the proposed removal.
Step 4: File Required Forms
After the resolution is passed, the company must file Form DIR-11 and Form DIR-12 with the Registrar of Companies (ROC), along with a certified true copy of the resolution.
Step 5: Update MCA Records
Once the ROC processes the forms, the director’s name is removed from the company’s master data on the MCA portal, completing the removal process.
Procedure for Removal of Director Due to Absence
A director can be removed from office if they fail to attend board meetings for 12 consecutive months. The process under company law is as follows:
Step 1: Absence from Board Meetings
Directors are required to attend company board meetings. If a director does not attend any board meeting for 12 consecutive months, their office is automatically deemed vacated, regardless of any prior notice of leave.
Step 2: Filing Form DIR-12
Following the vacation of office, the company must file Form DIR-12 with the Registrar of Companies (ROC) within 30 days to formally notify the removal.
Step 3: Update MCA Records
Once the ROC processes the filing, the director’s name is removed from the company’s master data on the MCA portal, completing the removal procedure.
Documents for Removal of Director
The documents required for the removal of a director include:
Certified True Copy of Board Resolution: A formal copy of the resolution passed by the board regarding the director’s removal.
Proof of Delivery of Resignation Letter: Evidence that the resignation letter was officially submitted to the company.
Copy of Resignation Letter: The original resignation letter submitted by the director.
Certified True Copy of Ordinary Resolution: A verified copy of the resolution passed by shareholders (if applicable) for removing the director.
Fees for Removal of Directors
The professional fees for removing a director may vary depending on the reason and procedure involved. The typical fee structure is as follows:
| Fee for Removal of Director | Amount |
|---|---|
| Professional Fee | ₹2,499 |
| Form DIR-11 | ₹300 |
| Form DIR-12 | ₹300 |
Timeline for Removal of Director
The removal of a director requires filing specific forms with the regulatory authorities. Typically, the entire process takes approximately 4 to 5 working days to complete.
