Remove a Director

Overview of Removing a Director:

A company can decide to remove a director at any point during its business tenure if there is an applicable reason. There can be different reasons for a director’s removal; there are also three procedures depending on it. Eazy Startups team is well versed and has the expertise in all three ways they can assist you.

What are the general reasons to remove a director?

Following are the reasons that result in the removal of a director:

• If they fulfil the disqualification criteria as per the Companies Act 2013
• In case of their absence from board meetings for more than 12 months
• If they sign contracts which are against the regulations of Section 184 of the Companies Act
• If a judicial order disqualifies them
• If they go to jail for more than six months for a crime
• Voluntary resignation from Directorship position.

What are the ways to Remove a Director?

There are three ways to remove a director as per different scenarios in the company:

When the Directors want to voluntarily resign

            As per the scenario, the steps to be followed are:

• Step 1: Conducting a board meeting with seven days’ notice is the first step
• Step 2: The resignation will be discussed in the meeting by the board members
• Step 3: After that, they must pass a resolution in a particular format
• Step 4: The resigning director must file Form DIR-11
• Step 5: Along with the board members’ approval and resignation letter of the director, the company is needed file Form DIR-12 with the registrar of companies (RoC)
• Step 6: Upon the completion of the removal process,, the Ministry of Corporate Affairs (MCA) database and its website are modified to delete the name of the removed director.

If the director is absent from the Board Meetings for 12 Months or more

• Step 1: Vacation of office is deemed to have occurred if a director misses all board meetings during twelve months, whether or not they seek a leave of absence from the board, as per Section 167
• Step 2: The DIR – 12 form must be filed
• Step 3: Upon the completion of the removal process,, the Ministry of Corporate Affairs (MCA) database and its website are modified to delete the name of the removed director.

If the shareholders decide to remove a director

• Step 1: A notice is sent within seven days from the date of the issue to all the board members, calling them for a board meeting
• Step 2: The resolution of the director’s removal is discussed at the board meeting; if it is approved by the board of directors, then the process progresses
• Step 3: The director being removed is given an opportunity to share their opinion about the resolution at the second board meeting, which is arranged after providing a 21-day notice.
• Step 4: A copy of the board resolution and an ordinary resolution must be filed along with Form DIR-12
• Step 5: Upon the removal process’s completion, the Ministry of Corporate Affairs (MCA) database and its website are modified to delete the name of the removed director as well.

Consequences of Not Filing Form DIR-12:

If the company fails to file DIR – 12 within 30 days from the date of resignation, the following penalties will apply:

• After 30 days before 60 days: twice the government fees
• After 60 days before 90 days: 4 times the government fees
• More than 90 days: 10 times the government fees
• More than 180 days: 12 times the government fees and will also be booked for the compounding offence.

Frequently Asked Questions