Company directors are responsible for managing and overseeing the daily operations and long-term strategy of a business, while shareholders hold ownership and ultimate control. At times, directors may choose to resign voluntarily, or shareholders may decide to remove a director due to non-performance, misconduct, or disqualification.
Removing or resigning a director is a serious corporate action governed by strict legal provisions under the Companies Act, 2013.
Whether through a Board Resolution, Ordinary Resolution, or Tribunal order, the process must be carried out transparently, following due process and ensuring compliance with all statutory requirements.
Our expert team ensures that every director change is executed smoothly from drafting resolutions to filing forms and updating MCA records ensuring complete legal compliance and accuracy throughout the process.
REASONS FOR DIRECTOR REMOVAL
As per the Companies Act, 2013, every private limited company must have at least two directors to commence and continue operations.
A director may be removed under the following conditions:
- Disqualification under Section 164 of the Companies Act, 2013.
- Failure to attend Board Meetings for twelve consecutive months.
- Violation of Section 184 engaging in prohibited transactions or conflicts of interest.
- Disqualification by an order of a Court or Tribunal.
- Conviction for a criminal offence involving imprisonment of six months or more.
- Non-compliance with corporate governance norms.
- Voluntary resignation from the directorship.
METHODS OF DIRECTOR REMOVAL
There are three primary methods for the removal of a director:
- Resignation by the Director – Voluntary step-down initiated by the director through written notice.
- Automatic Vacation of Office – Occurs when a director fails to attend any Board Meeting for 12 months.
- Removal by Shareholders – Initiated through a shareholder resolution passed in a General Meeting.
LEGAL PROVISIONS GOVERNING DIRECTOR REMOVAL
The removal or resignation of directors is governed under the following key sections of the Companies Act, 2013:
- Section 169: Procedure for removal of directors by shareholders.
- Section 168: Director’s voluntary resignation.
- Section 115: Special notice requirements for proposing director removal.
- Section 167: Automatic vacation of office due to absence or disqualification.
- Rule 23 of the Companies (Management and Administration) Rules, 2014 – governs procedural requirements for the removal process.
REQUIREMENTS FOR DIRECTOR REMOVAL
To ensure compliance and validity, the following must be strictly observed:
- Issuance of Special Notice: As per Section 115, a special notice must be served before initiating removal.
- Notice to the Director: The concerned director must receive notice at least 14 days prior to the meeting.
- Right to be Heard: The director must be given an opportunity to present their case in writing or in person.
- Restriction on Reappointment: Once removed, the same director cannot be reappointed to the Board.
- Mandatory Filing: The company must file Form DIR-12 with the Registrar of Companies (ROC) to record the removal.