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Remove a Director under the Companies Act 2013
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REMOVING A DIRECTOR - OVERVIEW:
The director of a company is a person elected by the shareholders for managing the affairs of the company as per the Memorandum of Association and Articles of Association of the company. Since a company is an artificial judicial person created by law, it can only act through the agency of natural persons. Thus, only living persons can be Directors of a company and the management of a company is entrusted to the Board of Directors. Appointment of Directors can be required for a company from time to time based on the requirements of the shareholders of the business.
The person who is pursuing to become a Director should acquire a Digital Signature Certificate (DSC) and Director Identification Number (DIN). The person who is above 18 years can easily obtain a DIN (Director Identification Number).
REASONS TO REMOVE A DIRECTOR
- If they incur any of the disqualifications specified under the Companies Act
- If they absent themselves from board meetings over 12 months
- If they enter into contracts or arrangements against the provisions of Section 184 of the Companies Act
- If they are disqualified by an order of a court or tribunal
- If they are convicted by a court of any offence and sentenced to imprisonment for not less than six months
- If they have not abided by the terms and protocols mentioned in the Companies Act of 2013
- If they have resigned voluntarily from their position.
WAYS TO REMOVE A DIRECTOR
1. When the Director himself gives Resignation
The steps to be followed in this scenario are:
- Holding a board meeting by giving seven days of clear notice
- In the meeting, the board members will take note of the resignation
- Then they have to pass a resolution in a particular format to that effect
- After that, Form DIR-11 needs to be filed by the resigning director in his individual capacity
- The company has to file Form DIR-12 with the registrar of companies (RoC) along with the registration letter and the board resolution
- When all the forms are filled and the formalities for the removal of the director are done, the name of the director will be removed from the master data of the company on the Ministry of Corporate Affairs (MCA) website.
2. Director Remains Absent from the Board Meetings for 12 Months
- If a director absents himself from all the meetings of the board of directors held over a period of twelve months, with or without seeking leave of absence from the board, they are considered to have vacated their office as per Section 167
- A Form (DIR-12) must be filed
- Upon completion of the formalities, the concerned director’s name will be removed from the database of the Ministry of Corporate Affairs (MCA).
3. Removal of Director by Shareholders
- A notice is sent to all the shareholders for a board meeting required to be conducted within seven days from the date of the issue
- A resolution is passed to have a general meeting and then for the removal of the director, subject to the approval of the shareholders on the day of the meeting
- After providing a 21-day notice, the second meeting of shareholders is held to vote on the resolution passed earlier and the director who is being removed by the shareholders will be allowed to speak on their removal
- The shareholders must file Form DIR-12, along with the attachments of the board resolution, and an ordinary resolution
- Once all the formalities are over, the name of the concerned director is removed from the database of the Ministry of Corporate Affairs (MCA) and its website.
This is the simplified version of the whole process. The removal procedure has to be carried out carefully and should follow the procedure laid down in the Companies Act.
TaxOnTime Experts can help you in the above process with simple and easy documentation. We will provide you help at every step of the entire process
REMOVE A DIRECTOR FAQs :
- By the director by giving their resignation
- If the director is absent from board meetings for 12 months
- By the shareholders, if they deem it necessary.
Yes, a company director can be removed without their consent. However, such removal calls for a strict procedure to be followed.
The minimum number of directors required is based on the type of company. For a one-person company, it is 1, for a private company it is 2, and a public company needs to have at least 3 directors.
A person cannot be appointed as a director if they don’t qualify under the AoA, if they are undischarged bankrupt, or if they are restricted by a court order.
A private company can have a maximum of 15 directors.
Yes, a person with a criminal record can be a director of a company, as long as they are not restricted specifically by a court order.
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