Can a Company Remove a Director?

Yes, a company director can be terminated without their consent. However, such removal calls for a strict procedure to be followed.

To begin, we must define director removal. The suo-moto removal of a director occurs when the company’s Board of Directors decides to remove a director. The reasons for taking such action are numerous and differ from one company to the next, but yes, a corporation can fire any of its directors. However, there is a process for doing so. The reasons for taking such action vary significantly from company to company.

What is the Process to Remove a Director?

The procedure to remove a director is as follows:-

1. A notice should be prepared and drafted resolution(s) to be passed in the board meeting.

1. The company should inform the concerned director that he is being removed.

1. Sending of Notice and Agenda of the Board meeting to all the company’s Directors.

1. Convene a board meeting to consider the removal of the concerned director and to give notice of the general meeting to company members.

1. A general meeting notice must be sent to all members at least 14 days prior to the general meeting date. A special notice to remove a director must be passed at least 14 days before the concerned meeting at which it must be moved, excluding the day on which the notice is served and the day of the meeting.

1. A special notice is required of the company. It shall be signed, either individually or collectively, by a sufficient number of members holding not less than 1% of total voting power/holdings for which an aggregate sum of but no more than ₹5 lakhs has indeed been paid as of the notice date.

1. Holding a General Meeting to allow the director to be removed to be heard and speak. Ordinary resolutions may be passed if they appear to be just and equitable.

1. Before passing a resolution, a director is allowed to speak his opinion, and he is given a fair chance to the board. Ordinary resolutions may be passed if they appear to be just and equitable.

1. Passing of ordinary resolution if it seems just and equitable.

1. Preparation of documents for the removal of the director, as well as notification to relevant departments
   

Removal of Director by Shareholders

Step 1: A notification to all shareholders is sent out to a board meeting that must be held within seven days of the date of issuance.

Step 2: A resolution is managed to pass, calling for a general meeting and then removal of the director, subject to shareholder approval on the meeting day.

Step 3: After furnishing a 21-day notice, the second meeting of shareholders is held to vote on the resolution passed earlier, and the director who the shareholders are removing will be allowed to speak on their removal

Step 4: The shareholders must file Form DIR-12 and the board resolution’s attachments and an ordinary resolution.

Step 5: Once all formalities are met, the concerned director’s name is removed from the Ministry of Corporate Affairs (MCA) database and website.

 

 

Created & Posted by Pooja

Income Tax Expert at TAXAJ

 

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