Accounts & Compliance

A Director in a company may want to resign or the Board of Directors may want to remove the Director for several reasons. The Director of a company can also resign from the Board by filing a resignation letter with the company and also intimating the ROC with the same. Here, we will take a look at the procedure that a director needs to follow in case he wants to resign from the post of Director.

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Removal of Directors

Director’s notice of resignation to the company

After giving notice in writing to the Company a Director may resign from a company. The Board is required to intimate the ROC of this notice within 30 days in the form of DIR-12. If the Director chooses, he can also send a copy of the resignation letter to the ROC along with the reasons for the resignation using Form DIR-11.

Obligation on the part of the Director who is resigning from the post

• A director can resign from his office by submitting a notice in writing to the Board of Directors of the company. An email or a letter to the company is also a valid mode of communication.
• A copy of the resignation can also be forwarded along with the detailed reason for the resignation to the Registrar of Companies in Form DIR11 with the prescribed fees in the Companies Rules, 2014 within 30 days from the date of resignation. *Effective date of resignation: It shall be in effect from the date on which the company has received the notice of resignation or the date the director has specified any. The effective date of resignation shall be the same as the date of cessation that is entered in the form DIR12.
• With DIR-11 the Director is also required to attach the following documents:
  • Notice of the resignation that is filed with the Company (resignation letter can also be attached)
  • Proof of Dispatch of the letter.
  • If any acknowledgment that is received from the Company and is mandatory is the Director has selected Yes in Form DIR11.
  • Other information can also be provided as optional attachments.

Obligations for the Company

• The Board of Directors shall take considers the notice of resignation that is received and accordingly the resolution should be passed by the Board of Directors for accepting the resignation and it is necessary to draft the minutes of the meeting of the Board of Directors.
• The Registrar should be intimated in Form DIR12 (According to Rule 15 of the companies, 2014) the Board of Directors should be intimated within 30 days from the date the resignation is received.
• The board of directors should mention the resignation in the Director’s report of the annual general meeting and it should also be reflected on the website of the Company.
• The company is required to attach these documents while filing DIR1:
  • The notice of resignation (Mandatory)
  • Evidence of cessation (The board resolution or the acceptance letter can be attached)

Liability of Director after the resignation

Once the Director has resigned and the Board has accepted his resignation, the Director is not liable for any liabilities that are incurred by the company after the date of acceptance of the resignation.

However, a Director is still liable for any offenses that have occurred during his or her as the director of the Company.

Process for Removing a Director

A Company can remove its directors before the expiry of its term, these powers are vested with the shareholders. Here we will talk about the process of removing the Directors of a Company. In case of Non-compliance with any one of these processes can make the decision void, if appealed in a court.

Basic Prerequisite

This process of removing the Director cannot be initiated without providing an opportunity to the Director who is to be removed. This is one of the basic requisites of the laws ordained which provides the defendant or the defaulter an opportunity to be heard.

Issuing Notice

This process of removing Directors must be initiated by a notice. This notice should be processed by the shareholders who have a minimum voting power of 1% or someone who holds shares on which an aggregate sum of not more than Rs. 5,00,000 is paid upon the date of the notice. This is a special notice that should be signed by all the members. This special note should be delivered to the Company at least 14 days before the meeting is held at which resolution will be passed. The notice won’t be valid if isn’t issued before three months of the date of the meeting.

Notice to Members

The Director must be sent a copy of the Notice, who will be heard on the resolution at the meeting, whether the director is a member or not a member of the Company. The notice should be served at least seven days which is a week before the date of the meeting which is held.

If the shareholders are not able to deliver the notice it can be published in any two newspapers, one in English and one in the vernacular newspaper. The notice must be mandatorily posted on the company’s website again this should be done seven days before the date of the meeting.

Representation in writing

The concerned director can make a representation against this removal notice. The director can request the company to send the representation to all the members. Also, the members should be notified of the representation by a notice. In case the company is not able to all the members the director may request for reading of this representation.

Appeal to the Tribunal

An application can be made to the tribunal if the organization or any aggrieved person decides against sending out the representation to the members or reading it out in the meeting, to request to nullify the process. The tribunal can also annul the process if it finds that the Director uses this right for unnecessary publicity for defaming purposes. This director is also given the right to issue an order demanding the director to cover the cost of the application borne by the company.