Removal of Director

Removal of Director

Legal Process for Director Removal under Companies Act, 2013

Ensure smooth and compliant leadership transitions in your company. Tax Pal Solutions offers expert guidance for removing a director legally, with full compliance under the Companies Act, 2013.

Key Highlights

• Complete Legal Drafting of Notices & Resolutions
• ROC Filing Support for Form DIR-12
• Expert Consultation on Director Removal
• End-to-End Process Management
• Trusted by 20,000+ Indian Businesses

Overview

A director acts as a company’s leader, making strategic and operational decisions. However, circumstances may arise where a director must be removed due to poor performance, misconduct, or voluntary resignation. Section 169 of the Companies Act, 2013 governs removal by shareholders, while Sections 167 and 168 cover automatic vacancy and voluntary resignation, respectively.

Who is a Director?

A director, as defined under Section 2(34) of the Companies Act, 2013:

• Is appointed by shareholders
• Forms part of the Board of Directors
• Manages company operations and finances
• Protects shareholder interests
• Ensures legal compliance

Grounds for Director Removal

Methods of Director Removal

1. Resignation by the Director

• Director submits a resignation letter
• Board accepts resignation
• Company files Form DIR-12 with ROC

1. Automatic Vacancy (12 months absence)

• Board confirms absence
• Resolution passed to vacate office
• File Form DIR-12 with ROC

1. Removal by Shareholders (Section 169)

• Shareholders send special notice (≥1% voting power or Rs. 5 lakh shares)
• Director can submit a representation
• EGM called and ordinary resolution passed
• File Form DIR-12 within 30 days

1. Removal of Nominee Director

• Appointing entity removes director as per agreement
• Company informed in writing

1. Removal by Tribunal (NCLT)

• NCLT can remove directors for fraud, mismanagement, or oppression
• Section 242(2)(h) empowers NCLT

Documents Required for Removal

Step-by-Step Removal Process

Resignation by Director:

1. Director submits resignation notice
2. Board meeting held to accept resignation
3. Company files Form DIR-12 with ROC

Shareholder Removal:

1. Special notice sent by shareholders
2. Director given opportunity to represent
3. Board calls EGM with notice ≥21 days
4. Voting at EGM; ordinary resolution passed
5. File Form DIR-12 with ROC

NCLT Removal:

1. Complaint filed for mismanagement or fraud
2. Tribunal hearing conducted
3. Director removed; barred for 5 years

ROC Fees for Director Removal

Professional Fees: Include legal drafting, ROC filing support, consultation, and end-to-end process management. Fees vary based on complexity.

Form DIR-12

• Mandatory for resignation, appointment, or removal
• File within 30 days of director change
• Digitally signed by continuing director or key managerial personnel

Penalties for Non-Compliance:

Implications of Director Removal

For Director:

• Loss of position and authority
• Possible damage to professional reputation
• Liability for wrongful acts while in office
• Potential compensation for loss of office

For Company:

• Board composition changes
• Need to appoint a new director if required
• Possible short-term operational impact
• Risk of negative publicity if removal is contentious