Remove a Director From Your Company 2022
Each private company must be able to count at least two directors. Any public entity must have at minimum three directors for any period. Let’s consider three possible scenarios in the event of the demotion of directors:
There is the option to remove or add directors from the business at any point. There are a variety of reasons to remove a director from your company, and there are a few ways to do it based on the reasons.
Motives to Remove a Director From Your Company
There might be several reasons to remove a director from your company and some of them are listed below:
- If they are subject to some of the penalties mentioned in the Companies Act
- If they do not attend board meetings for more than 12 months, they will be deemed to have been absent.
- If they sign arrangements or contracts in contravention of the requirements in Section 184 of the Companies Act
- If they’re disqualified under an order of a tribunal or tribunal
- If they are found guilty by a judge of an offense and sentenced to prison for not less than six month
- If they haven’t adhered to the rules and procedures outlined within the Companies Act of 2013
- If they have resigned involuntarily from their job.
There are a variety of reasons to remove a director from your company and there are three ways to do it based on the various reasons.
Ways to Remove a Director from your Company
Down below we have mentioned the three ways to remove a director from your company. Let’s see what are they.
1. If the Directors Offer Their Resignation
The steps to follow in the following scenario include:
Step 1: Conducting board meetings by providing seven days’ clear notice.
Step 2: At the meeting, all board members make a note of the resignation.
Step 3: Then, they must submit a resolution in the format specified for that result.
Step 4: Following that, Form DIIR-11 has to be completed by the departing director in his capacity.
Step 5: Your company needs to complete Form DIR-12 with the company’s registrar (RoC) together with the registration form and the resolution of the board.
Step 6: After all of the paperwork has been completed and all formalities for the removal of directors are completed and completed, the director’s name will be removed from the master records of the company’s Ministry of Corporate Affairs (MCA) website.
2. Director is Absent from board meetings for 12 months
Step 1: If a director does not attend all meetings of the directors’ board for twelve months, without or being granted leave by the board members, they will be assumed to have left their office following Section 167.
Step 2: An Application Formula (DIR-12) is required to be completed and filed.
Step 3: Once the formalities, the director’s name is removed from the databases of the Ministry of Corporate Affairs (MCA).
3. The removal of Directors by Shareholders
Step 1: An announcement is issued to all shareholders informing them of an annual board meeting that must be held within seven days of the date of the announcement.
Step 2: The resolution adopted to hold a general assembly and, subsequently, to remove of director subject to the consent of shareholders on the day of the meeting.
Step 3: After giving a 21-day notice The shareholder’s second meeting will be scheduled to approve the resolution that was passed earlier. The director being removed by shareholders will be able to speak about the basis of their removal.
Step 4: the shareholders have to complete Form DIR-12, with attachments to the board resolution and an ordinary resolution
Step 5: After all formalities are completed the director’s name is deleted from databases maintained by the Ministry of Corporate Affairs (MCA) and its website.
This is the most simplified version of the procedure. The process to remove a director from your company has to be done with care and in line with the process set out by the Companies Act.
Consequences of Filing Form DIR-12
DIR-12 must be submitted within 30 days of the day of resignation. If the company fails to file it then these penalties are imposed:
- After 30 days, within 60 days: double the costs
- After 60 days, but in 90 days: four times the fees of the government
- If it lasts longer than 90 days The government will charge 10 times the costs
- If it goes over 120 days, it will be 12x the cost of the government and you will be charged for the compounding offense as well.
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These are some of the options to remove a director from your company. However, any public entity must have at minimum of three directors for any period, or Each private company must be able to count at least two directors.
So, if you still have any queries related to Removing a Director from your company, we are ODINT Consultancy. We’re we are here to assist you at each step of your way.
A company director may be removed without consent. However, this removal requires a strict process to be adhered to.
A person isn’t able to be appointed director if they do not be eligible under the AoA or if they’re not discharged as a bankrupt, or if they are prohibited by the court’s order.
Directors can be removed by three methods:
- The director gives their resignation
- If the director has been absent for 12 consecutive months
- The members of the shareholders, when they feel it appropriate
The directorship minimum required is determined by the type of business. If you are a single-person business the minimum number of directors is 1.
Sandeepan has great experience in business consulting and management, Sandeepan provides insightful resources in Company Formation, Business Expansion, and related areas.