Procedure to remove a Director of Company

The shareholders of a company can remove any director through ordinary resolution before the expiry of his tenure, except any director appointed by the Tribunal for prevention of oppression and mismanagement under Section 242 and a director appointed under the principle of proportional representation under Section163 of the Companies Act, 2013.

The right to remove a director vests in the shareholders of the Company and is the legal right of the shareholders. Section 169 and Chapter 7 of the Companies Act, 2013 contain the provisions relating to removal of a director before his term expires.

Procedure to remove a Director of Company

1.   Give a Special Notice :- A Special Notice as per the provisions of Section 115 of the Companies Act, 2013 of the intention to move a resolution for removal of the director be furnished by number of members to the company at least 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served and the day of the meeting.(Section 169)
2. No need to state reasons for removing the Director in the Explanatory Statement : In LIC of India v. Escorts Ltd. AIR 1986 SC 1370 it was held that it is not necessary to give reasons in explanatory statement for removal of a director as desired by section 173(2) of the Companies Act, 1956 (corresponding Section-102 of the Companies Act, 2013). Reason behind this judgment given by the court is that the company is acting on the basis of a special notice given by the shareholder u/s 284 of the Companies Act, 1956 and it is not a resolution proposed by the company. The relevant extract of the said Judgment is appended below:-“It is true that under s. 173(2) of the Companies Act, there shall be annexed to the notice of the meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent if any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. It does not require the shareholders calling a meeting to disclose the reasons for the resolutions which they propose to move at the meeting. The Life Insurance Corporation of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an extraordinary general meeting of the company for the purpose of moving a resolution to remove some Directors and appoint others in their place. The Life Insurance Corporation of India cannot be restrained from doing so nor is it bound to disclose its reasons its reasons for moving the resolutions.”
3.   Notice of Resolution :- The Company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting.
4. Publish in Newspaper:-   In case the company is not in a position to give notice to all the members, it can publish by way of an advertisement in the newspaper having an appropriate circulation not less than 7 days before the meeting.
5. Give Notice to Director :-  The Company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The Director shall have the right to be heard on the resolution at the meeting.
6. Director can make Representation :-  The Director who is sought to be removed, can make a representation in writing against his removal and request the Company to notify it to the Company’s members. Further, if the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must :

(a)              mention in the notice of the resolution to be moved at the Annual General meeting, the fact of the representation having been received; and

(b)              send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

6.  Oral Representation by Director:-  If the representation could not be sent to the members because it was received too late or because the company made a default in sending it, the company must read out the representation at the Annual General Meeting, if the director requires it to do so. In addition to the above, the director can make oral representation at the Annual General Meeting.
7.   General Meeting:  Thereafter hold and convene a General Meeting to discuss besides other matters, if any of the following matter relating to removal of director:

“To pass a ordinary resolution for removal of the Director”

8.  Inform to Stock Exchange:-  If the company is a listed entity then it should file a copy of the proceedings of the General meeting before the Stock Exchange(s) where the securities of the company are listed.
9.   File DIR -12:– The company also to file Form DIR-12 in e-form with the Registrar of Companies within 30 days of passing the resolution along with certified true copy of Special Notice received from the shareholders, proof of delivery of Special notice to the director concerned, Notice of EGM to other shareholders and certified true copy of the resolution passed at EGM for removal of the director.
10.   Pay Fees :-The Company should pay the requisite fees, as prescribed under the Companies ( Registration Offices and Fees) Rules, 2014.