Removal of Directors

February 17, 2023

This article has been written by Pallavi Jindal, a student of NEF Law College, Guwahati

INTRODUCTION

According to Section 2(24) of the Companies Act, 2013 Director means a director appointed to the Board of a Company. According to Section 2(10) of the Companies Act, 2013 Board of Directors or Board in relation to a company means the collective body of the directors of the company. They are responsible for business growth and operation. According to Section 153 of the act the individual who are appointed as director of a company shall be allotted a director identification number by filling form DIR-3.

There are six types of directors under Companies Act, 2013. The different types of directors are as follows:

Managing Director: Managing directors are those directors who have substantial control over the affairs of the company as per articles of the company.
Additional Director: Additional directors are those directors who are appointed by the board till the appointment is approved by the members of the company.
Nominee Director: Nominee director is a director who is appointed as nominee who manages the working of the company.
Whole time Director: Whole time director is a director who is appointed as the permanent director of the company in the whole time employment.
Independent Director: Independent Director is a director other than a managing director, whole time director or a nominee director and who have experience and expertise, who is or was not a promoter etc.
Small Shareholder Director: Small Shareholder Director is a director who is appointed by not less than one thousand or one-tenth of total number of such shareholders whichever is lower.

PROVISION REGARDING REMOVAL OF DIRECTORS:

Section 169 of the Companies Act, 2013 deals with removal of directors. A director can be removed by passing an ordinary resolution before the expiry of the period of his office.

The directors can be removed in two ways:

Removal of Director by Shareholders.
Removal of Director by the National Company Law Tribunal.
Removal of Director by Shareholders: A director can be removed by passing ordinary resolution before the expiry of the period of his office after giving him a reasonable opportunity of being heard.

The procedure for removal of directors is as follows:

A member of a company needs to give special notice by proposing an ordinary resolution for removing the director is necessary.
A copy of special notice needs to be sent to the director who is proposed to be removed.
A general meeting is called by passing board resolution.
A notice of general meeting is issued twenty one days before the meeting stating about the special and resolution for removal as well as copy of the representation of the director is sent to all the members.
Then the director is given the opportunity of being heard in the meeting.
Then the ordinary resolution is passed in the meeting.
The company needs to file form DIR-12 along with the other documents with the registrar within thirty days of the removal of director after paying the requisite fee.
Then the particulars of the directors are modified in the registers which is maintained under Section 170 and 189.
Then a public notice is given in the newspaper regarding the removal of directors for the protection of the company and for the public good.

Removal of Director by the National Company Law Tribunal: Under Section 241 of the Companies Act, 2013 an application is filed to the National Company Law Tribunal for prevention of oppression or mismanagement and the tribunal has conducted its proceedings on the application, it has the power under Section 242(2)(h) of the Companies Act, 2013 to remove any director.

CASES REFERRED:

M/S Nizamabad Corpn. Products(P) Ltd. vs Vasudev Dalia, 1993 3 ALT 303: In this case an appeal was filed in the tribunal stating that the resolution passed in the annual general meeting concerning removal of directors is illegal and void. The court allowed the appeal and set aside the order of temporary injunction.
Puroshotam Vishandas Raheja vs. Courchevel Trading Pvt. Ltd: In this case the petitioner was removed without serving any notice to them. Then the respondent argued that the petitioner is removed as he defaulted in attending the meeting under Section 167 of the Companies Act, 2013 and also stated that the petitioner was given time to amend the petition and the amendments were done by him. The court held that the applicant must be allowed to make amendments in the interest of natural justice and the validity of removal of petitioner as a director will be decided at the time of disposal of the petition.
Sanjay Parlikar & Anr. Vs M/S Ajit Scanning & Diagnostic Centre Pvt Ltd.: In this case the petitioner stated that the respondent did not hold any board meeting and the appellant was removed without any notice.

CONCLUSION:

The directors are those who manage the affairs of the company and they can be removed under Section 169 of the Companies Act, 2013. The reasons or causes for his removal are if there is any disqualification under the Companies Act, 2013 or if they are absent for 12 months from the board meeting of the company or is disqualified by the order of the court or the tribunal or have resigned voluntarily from the post of directorship. So from this we can say that the directors can be removed for the following grounds as stated under the law and if the companies do not follow the provision of Section 169 of the Companies Act, 2013 then it will be liable and penalized accordingly under the Companies Act, 2013.

REFERENCES:

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com

Join our Whatsapp Group for latest Job Opening

February 17, 2023