Removal of Director
Removal of Director from a Company
Directors handle a company’s management and day-to-day operations, while shareholders are the actual owners. Sometimes, directors may be removed due to poor performance, misconduct, or other reasons. Alternatively, a director may decide to resign on their own.
Removing a director is a serious decision and must follow the legal rules set by the Companies Act 2013 (or other relevant laws). Whether done through a board resolution, ordinary resolution, or a court order, the process must be fair, transparent, and always in the company’s best interest.
Key Reasons for Removing a Director
🔍 Poor performance or failure to fulfill responsibilities
❌ Misconduct or violation of company policies
🏢 Change in management or company restructuring
📜 Legal disqualification under company law
Penalties for Delayed Submission of Form DIR-12
If a company fails to file Form DIR-12 within the required 30-day period after a director’s resignation, penalties increase based on how long the delay lasts:
⏳ 30 to 60 Days Delay
- Penalty: 2x the standard government fees
🕒 60 to 90 Days Delay
- Penalty: 4x the government fees
🚨 Beyond 90 Days Delay
- Penalty: 10x the government fees
⚠️ Exceeding 180 Days Delay
- Penalty: 12x the government fees
The company could also face legal action for compounding offences.
Essential Requirements for Director Removal
Issuance of Special Notice
- A special notice, as per Section 115, must be issued to begin the removal process.
Notice Period to the Director
- The special notice should be sent to the concerned director at least 14 days before the meeting where the removal will be discussed.
- This gives the director enough time to prepare their response.
Right to Be Heard
- The director should have the opportunity to explain their side of the story.
- They can submit a written representation, which can either be shared with members or read out during the meeting.
Restriction on Reappointment
- After removal, the director cannot be reappointed to the board of the same company.