Directors are like torchbearers of the company and they are responsible for the conduct and operations of the same. A private company should have at least 2 directors whereas a public company should have at least 3 directors. However, certain peculiar situations may arise whereby the company may decide to remove a director from the company. This can be possible as the Companies Act, 2013 allows the removal of directors of the company. Let’s understand when can a company remove a director and what is the procedure for the same.
Basically, if a director becomes disqualified to act as a director of the company, the company can proceed to remove the director. This can include continuous absence from the board meeting for a continuous period of 12 months or enter into agreements or arrangements against the provisions of Section 184. Even if the director is convicted by the tribunal or court and sentenced to imprisonment for not less than 6 months, then the director can be removed.
However, it shall be noted that a director being appointed by the Tribunal under section 242 cannot be removed by the company. Now, let’s discuss the procedure for removal of directors under company law.
The procedure for removal of director are discussed under Section 169 of the Companies Act, 2013. As per these provisions, a director can be removed from the company before the expiry of his tenure by passing an ordinary resolution in the general meeting of the company. However, such a director should be given a reasonable opportunity of being heard. It should be noted that an independent director who is reappointed for a second term in the office under section 149(10) shall be removed from the company only after a special resolution has been passed in the general meeting and after giving such director a reasonable opportunity of being heard.
Special notice should be given to remove a director or appoint another director in his place. Upon receiving the notice, the company shall immediately send the notice of removal to the director concerned. Following the due procedure prescribed, the director can then be removed, and the company can appoint some other person as director in the same meeting as well. The new director so appointed in the meeting should hold office till the date his predecessor director would have held the office had he not been removed.
In case the vacancy is not filled in the same meeting, then it can be filled as a casual vacancy. The removed director cannot be reappointed as director in the board of directors. Further, the removal of the director shall not deprive such director of his right to compensation or damages being payable to him under this act in relation to his termination as per the terms of the contract or his appointment.
In case of the removal of a director under company law, the company shall adhere to the prescribed ROC compliances. The company should file necessary returns within 30 days of passing the ordinary resolution in the general meeting. Non-adherence to ROC compliances can attract penal consequences against the company.
Following were the detailed provisions relating to the removal of directors of the company. The company should exercise this power responsibly and for the benefit of the company as a whole. For more information, reach out to ASC Group.
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