Removal of Director

What Is Removal of Director?

The removal of a director refers to the legal process of removing an individual from the position of a director in a company. Directors are appointed by the shareholders or board of directors and can be removed under certain conditions as defined in the company’s Articles of Association and relevant laws, such as the Companies Act, 2013 (for Indian companies).

Benefits of Removing a Director:

• Improved Management: Removing a non-performing or inefficient director can improve the overall management and decision-making process.
• Legal Compliance: Ensures that the company’s leadership complies with governance and legal standards.
• Risk Mitigation: Helps in mitigating risks caused by a director’s unethical behavior or misconduct.

Process of Removal of Director:

1. Board Meeting:
   • The board may pass a resolution to propose the removal of a director. In certain situations, the removal of a director can only be proposed at a general meeting if shareholders are involved.
2. Special Notice:
   • A special notice (usually 14 days’ notice) must be given to the company proposing the removal of the director. This notice is usually sent to the company’s members/shareholders.
3. Shareholder Meeting:
   • A general meeting (EGM or AGM) is called where the shareholders will vote on the special resolution to remove the director. A simple majority vote is needed for the resolution to pass.
4. Right to be Heard:
   • The director being removed has the right to be heard at the meeting. They can submit their objections or reasons for opposing the removal.
5. Resolution Approval:
   • If the special resolution is approved by the shareholders, the director is removed from their position. This should be documented in the meeting minutes.
6. Filing with Registrar of Companies (RoC):
   • After the director’s removal, the company must notify the Registrar of Companies by filing a form (e.g., Form DIR-12 in India) to update the company’s official records. The removal is legally effective once this form is filed.
7. Finalizing the Removal:
   • After all necessary approvals and filings are completed, the removal becomes effective, and the director is no longer part of the company’s management.

Documents Required for Removal of Director:

• Board Resolution: A resolution passed by the board of directors proposing the removal of the director.
• Special Notice: A notice given by the shareholders proposing the removal of the director.
• Notice of Meeting: A notice to call the general meeting to vote on the removal.
• Form DIR-12: For filing the removal of a director with the Registrar of Companies (India).
• Minutes of the Meeting: Documenting the decision and resolution passed in the general meeting.