Removal of Existing Director in Private Limited Company
Statutory Procedure by Ordinary Resolution
Step-by-Step Removal Procedure
Key Requirement: Ordinary Resolution
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Authority to Remove: A company can remove a Director by passing an Ordinary Resolution, provided the Director was not appointed by the Central Government or the Tribunal.
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Notice for Board Meeting: A Board Meeting must be called by giving seven days’ notice to all Directors. A special notice must also be sent, informing them about the proposed removal.
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Board Meeting Decision: On the day of the Board Meeting, a resolution is passed to hold an Extraordinary General Meeting (EGM) and to propose the Director’s removal, subject to shareholders' approval.
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Calling the General Meeting: An EGM must be conducted by giving 21 days’ clear notice to all members. During the meeting, members vote on the proposal. If the majority approves, the resolution for removal is passed.
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Right to Be Heard: Before the resolution is finalized, the Director concerned must be given a fair opportunity to present their explanation.
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Post-Approval Filings: After the resolution is passed, the company must file DIR-11 and DIR-12 along with required attachments, including the Board Resolution and the Ordinary Resolution.
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Updating MCA Records: Once the forms are filed, the Director’s name is officially removed from the Ministry of Corporate Affairs (MCA) website.
Note: This power of removal applies unless the Director was appointed by the Central Government or the Tribunal.
Appointment in Place of Removed Director
- An opportunity made by the removal of Directors under this area may, on the off chance that he had been designated by the company as a rule meeting or by the Board, be filled by the arrangement of another Director in his place at the gathering at which he is expelled, if exceptional notice of the planned arrangement has been given. An executive so named will hold office till the date up to which his antecedent would have held office on the off chance that he had not been expelled. On the off chance that the opening isn’t filled, it might be filled as an easygoing opportunity. The Director who was expelled from office will not be re-named as a Director by the Board of Directors.
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FAQ's on Removal Of Existing Director
Your Questions Answered
What is the main legal provision for the removal of a Director?
A company can remove a Director before the expiry of their term by passing an Ordinary Resolution at a General Meeting of the shareholders, as per Section 169 of the Companies Act, 2013. This power primarily rests with the shareholders, not the Board.
What is the prerequisite notice required for initiating the removal process?
The shareholders proposing the removal must give a Special Notice (Section 115) to the company at least 14 days before the General Meeting. The company then forwards this notice to the Director proposed for removal.
What is the Director's fundamental right before removal?
The Director proposed for removal has the statutory right to a reasonable opportunity of being heard (Right of Representation). This includes the right to make a written representation to the company and speak at the General Meeting where the resolution is moved.
Can a Director appointed by Proportional Representation be removed under Section 169?
No. The provision for removal by ordinary resolution under Section 169 does not apply to Directors appointed by the method of Proportional Representation (Section 163) or those appointed by the National Company Law Tribunal (NCLT).
Which mandatory e-form must the company file with the ROC after removal?
The company must file e-Form DIR-12 (Particulars of Appointment/Cessation of Director) with the Registrar of Companies (ROC) within 30 days from the date the Ordinary Resolution was passed in the General Meeting.
What happens if the Director resigns instead of being removed?
If the Director voluntarily resigns, the company must file Form DIR-12 to report the cessation. Additionally, the resigning Director has the option to file e-Form DIR-11 to personally inform the ROC of their resignation.
What is the penalty for failing to file Form DIR-12 within the stipulated time?
Failure to file DIR-12 within the 30-day timeline attracts substantial late fees (additional fees) calculated progressively based on the period of delay. Prolonged non-compliance can result in the company being marked as non-compliant.
Can the removed Director claim compensation?
Yes. Section 169 does not deprive the removed Director of any right to claim compensation or damages that may be payable to them as per the terms of their contract or service agreement with the company.
