Process of Removal of Director under Companies Act, 2013

Power to remove directors has always been bestowed on shareholders, as we all know that at the end of the day, directors are answerable to shareholders. Nothing has changed in the procedural aspect under Companies Act, 2013 as well. Shareholders can remove any director before the expiry of his tenure, except any director appointed by Tribunal for prevention of oppression and mismanagement u/s 242 and a director appointed under principle of proportional representation u/s 163.

Right to Remove a Director is Legal Right of Shareholders:

Section 169 and Chapter 7 of Companies Act, 2013 : Right of Shareholders to remove a director in the General Meeting through Ordinary Resolution is a Legal Right. This legal right cannot be damaged or taken away by MOA, AOA or any other documents or Agreement.
Procedure for removal of director in Tabular Form:

 

1. Special notice (as per section 115 of the Act) of the intention to move a resolution for the removal of director be furnished by No. 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. 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.

 

* No need to give reasons in explanatory statement as per section 102 of the Act.

3. If is not possible for the company to give notice to all the members, publish by advertisement in the newspaper having an appropriate circulation not less than 7 days before the meeting.
4. 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.
5. 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  . 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.

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, director can make oral representation at the annual general meeting.

6. Hold and convene a General meeting to discuss besides others the following matters: To pass a [Ordinary resolution] for the removal of director.
7. In case of listed companies, file a copy of the proceeding of the general meeting in the Stock exchange (s) where the securities of the company are listed.
8. File e-form no. DIR-12 with the Registrar of Companies within 30 days of passing the resolution with following attachments:

a)     CTC of Special Notice received from shareholder;

b)     POD of Special Notice to director concerned;

c)     Notice of EGM to other shareholders;

d)    CTC of Ordinary Resolution passed at EGM.

9. Pay the requisite fees, as prescribed by the Companies (Registration Offices and Fees) Rules, 2014.

As per Section- 115 of Companies Act, 2013:-

Special notice to Company – There is a criteria for who can send the notice to the Company. Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. The same should be signed by the concerned shareholder/s.

 

Date of meeting – Shareholders have the right to decide the date of meeting. However, the special notice shall not be sent earlier than three months from the date of meeting but at least 14 clear days before the date of the meeting, at which the resolution is to be moved.

 

* LIC of India v Escorts Ltd.

As per a milestone judgment given in LIC of India v Escorts Ltd. (1986) 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) (corresponding Section-102) . Reason behind this judgment given by the court was that the company is acting on the basis of a special notice given by the shareholder u/s 284 and it is not a resolution proposed by the company.

 

Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director

 

FORMAT OF NOTICE FOR CALLING EGM ON REQUISITION (SECTION 100 OF THE ACT)

 

Dated: _________________

 

The Board of Directors                                                 FOR IMMEDIATE ACTION

_______________Private Limited

____________________

____________________

 

Sub:   Requisition pursuant to Section 100 of the Companies Act, 2013 for an Extra-ordinary General Meeting of __________________ Private Limited

 

Dear Sir,

 

I, the undersigned, member of ________________ Private Limited holding, as the date hereof, ___________ equity shares in the capital of the company, representing __________% of the share capital of the company.

 

Pursuant to Section 100 of the Companies Act 2013, we, being holder of not less than one-tenth of the paid-up capital of the company carrying the right to vote at the general meeting, hereby require you pursuant to section 100 of the Companies Act, 2013 forthwith to proceed to duly convene an Extra-ordinary General Meeting (EGM) of the Company for the purpose of passing the following resolution:

 

AS AN ORDINARY RESOLUTION

 

“RESOLVED THAT Mr. __________________ be and is hereby removed from his office as the director of the company with immediate effect.

 

Please take all the necessary action to call for the said EGM in accordance with Section 169 of the Act.

 

Yours faithfully

 

______________

Name of Shareholder

Folio No. _____

 

 

FORMAT OF SPECIAL NOTICE FOR REMOVAL OF DIRECTOR

 

Dated: _______________

 

The Board of Directors                                                 FOR IMMEDIATE ACTION

_________________ Private Limited

___________________________

 

Dear Sir,

 

Sub:   Special Notice of intention to move resolution in connection with the removal of a Director

 

Further to our letter dated __________ (a copy of which is enclosed) in relation to the requisition for an extra-ordinary general meeting (EGM) of ___________ Private Limited, we, the undersigned members of the company, hereby give SPECIAL NOTICE pursuant to section 169 read with section 115 of the Companies Act, 2013, of our intention to move the following ordinary resolution in connection with the removal of Mr. _______________ as a director of the company at an EGM to be convened.

 

ORDINARY RESOLUTION

 

“RESOLVED THAT Mr. ___________________ be and is hereby removed from his office as the director of the company with immediate effect.

 

Thanking you

Yours faithfully

 

______________

Name of Shareholder

Folio No. _____

 

FORMAT OF INTIMATION TO CONCERNED DIRECTOR

 

Dated: _______________

 

To

Mr. _______________

Director of ___________ Private Limited

 

Dear Sir,

 

We enclose a copy of the special notice, which has been received by the Company from its member. As appears from the notice, a resolution is proposed at the next EGM of the Company for your removal as the director, pursuant to the provisions of section 169 of the Companies Act, 2013.

Your attention is drawn to the provisions of sub-section (4) of section 169 of the companies Act, 2013 [copy enclosed for reference]. In case you intend to make representations against the resolution for your removal, we request you to send the representations so as to reach us by ______________, so that it may be circulated to the members of the Company. In the event, the representations are not received by the aforesaid date; the same may be read out at the meeting.

Kindly acknowledge the receipt of letter for our reference and record.

 

Yours faithfully,

For ____________ Private Limited

 

 

 

________________

Director

DIN: ________

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About CS Swati Gupta

CS Swati Gupta | Propreitor

CS Swati Gupta is a Company Secretary in Practice from Delhi dealing in Corporate Law matters, IEC matters, Service Tax matters, Partnerships, and can be contacted at csswati75@gmail.com Mob: +91-9899721980

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