PROCEDURE
REMOVAL-
DIRECTOR
CA- 2013
Series-34
Power
to remove directors has always been bestowed on shareholders, as we all know
that at the end of the day, directors are answerable to shareholders. Nothing
has changed in the procedural aspect under Companies Act, 2013 as well.
Shareholders can remove any director before the expiry of his
tenure, except
any director appointed by Tribunal for prevention of oppression and
mismanagement u/s 242 and a director appointed under principle of proportional
representation u/s 163.
Right to Remove a Director
is Legal Right of Share Holders:
Section
169 and Chapter 7 of Companies Act, 2013 Right of Shareholders to remove a
director in the General Meeting through Ordinary Resolution is a Legal Right.
This legal right cannot be damaged or taken away by MOA, AOA or any other
documents or Agreement.
Section
169 and Chapter 7 details the procedure of removal of director by shareholders
as follows: -
A
company MAY, by ORDINARY RESOLUTION, remove a director, Not
being a director appointed by the Tribunal under section 242, before the expiry
of the period of his office after giving him a reasonable opportunity of being
heard.
The
provision relating to removal shall not apply where the company has
availed itself of the option to appoint not less than 2/3RD (two –
thirds) of the total number of directors according to the principle of
proportional representation.
A
special notice shall be required of any resolution, to remove a director, or to
appoint somebody in place of a director so removed.
As per Section- 115 of Companies Act, 2013:-
v Special
notice To Company-There is a criteria, who can
send the notice to the Company. Only shareholder/s holding not less than 1%
of total voting power or holding shares on which an aggregate sum of not less
than Rs. 5,00,000 has been paid up as on the date of notice, can send
special notice to the Company for removal of director. The same should be signed
by the concerned shareholder/s.
v
Date of meeting- Shareholders
have the right to decide the date of meeting. However, the special notice shall
not be sent earlier than 3 months (three months) from the date of meeting but
at least 14 clear days before the date of the meeting, at which the resolution
is to be moved.
On
receipt of notice of a resolution to remove a director, the company shall
immediately send a copy thereof to the director concerned, and the director,
whether or not he is a member of the company, shall be entitled to be heard on
the resolution at the meeting.
Intimation to Director- The
Company shall forthwith send a copy of the notice to the concerned director.
Reasonable Opportunity of
being heard-
The director concerned may make representation in writing to the company and
requests its notification to members of the company. The Director may request
to send his representations along with the notice to the members and to be
heard at the meeting. However, the rights may not be available, if on the
application either of the Company or of any other person who claims to be
aggrieved.
Intimation By Company to all shareholders:
1. The company shall, if the time permits it to do so;
(a)Company shall take immediate steps to send
the notice to its members, at least 7 clear days before the meeting. The notice
has to be sent in the same manner as in case of any other general meeting of
the Company; and
(b) Send a copy of the representation to
every member of the company to whom notice of the meeting is sent.
2. The company shall, if the time not permits it to do so;
Notice shall be published in
English language in English newspaper and in vernacular language in a
vernacular newspaper, both having wide circulation in the State where the
registered office of the Company is situated. At the same time, the notice
shall also be posted on the website, (if any). However, it shall be published
at least 7 clear days before the meeting.
The copy of the
representation need not be sent
out and the representation need not be read out at the meeting if, on the
application either of the company or of any other person who claims to be
aggrieved,
The
Tribunal is satisfied that the rights conferred by this sub-section are being
abused to secure needless publicity for defamatory matter; and the Tribunal may
order the company’s costs on the application to be paid in whole or in part by
the director inspite of that he is not a party to it.
***Members may pass remove
the director by passing ordinary resolution.
Appointment of director in
place of removed director- A vacancy created by the
removal of a director under this section may, if he had been appointed by the
company in general meeting or by the Board, be filled by the appointment of
another director in his place at the meeting at which he is removed, provided
special notice of the intended appointment has been given. A director so
appointed shall hold office till the date up to which his predecessor would have
held office if he had not been removed. If the vacancy is not filled, it may be
filled as a casual vacancy. The director who was removed from office shall not
be re-appointed as a director by the Board of Directors.
File
Form- DIR-12 within 30 days of passing of resolution for appointment of
Director.
Some Important Judgment come
under Section- 284 of Companies Act, 1956 (Corresponding of Section-169 of
Companies Act, 2013):
KHETAN INDUSTRIES PRIVATE LIMITED VS. MANJU
RAVINDRA PRASAD KHETAN
In
this case it was held by the court that the shareholders have a right to remove
the directors under section 284 by passing ordinary resolution and section 284
provides an inbuilt mechanism for the enforcement of the right and civil court
has no jurisdiction to entertain the suit for removal of director.
LIC of India v Escorts Ltd.
As
per a milestone judgment given in LIC of India v Escorts Ltd. (1986) it was
held that it is not necessary to give reasons in explanatory statement for
removal of a director as desired by section 173(2) (corresponding Section-102)
. Reason behind this judgment given by the court was that the company is acting
on the basis of a special notice given by the shareholder u/s 284 and it is not
a resolution proposed by the company.
Only
shareholder/s holding not less than 1% of total voting power or holding
shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up
as on the date of notice, can send special notice to the Company for
removal of director
PROCEDURE FOR
REMOVAL OF DIRECTOR IN TABULAR FORM:
1.
|
A (Special notice) of the intension to
move a resolution for the removal of director be furnished by No. of members
(according to requirement of Section- 115 of Companies Act, 2013) to the
company at least 14 days before the meeting at which it is to be moved,
exclusive of the day on which the notice is served and the day of the
meeting. (Section 169)
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2.
|
The
company shall, immediately after the notice of the intention to move any such
resolution has been received by it, give its members notice of the resolution
in the same manner as it gives notice of the meeting.
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3.
|
If
is not possible for the company to give notice to all the members, publish by
advertisement in the newspaper having an appropriate circulation not less
than 7 days before the meeting.
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4.
|
The
company must give intimation to the concerned director of the intended
resolution by sending a copy of the special notice received by it, forthwith
on receipt thereof. The director shall have the right to be heard on the
resolution at the meeting.
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5.
|
The director, who is
sought to be removed, can make a representation in writing against his
removal and request the company to notify it to the company's members [section 169]. If the director
requests the company to notify the members of the company his representation
against his removal and the representation is of reasonable length and it has
been received not too late, the company must
If the representation
could not be sent to the members because it was received too late or because
the company made a default in sending it, the company must read out the
representation at the annual general meeting, if the director requires it to
do so. In addition, director can make oral representation at the annual
general meeting.
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6.
|
Hold
and convene a General meeting to discuss besides others the following matters:
To pass a [Ordinary resolution] for the removal of
director.
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7.
|
In
case of listed companies, file a copy of the proceeding of the general
meeting in the Stock exchange (s) where the securities of the company are
listed.
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8.
|
File [e-form no. 12] with the Registrar
of Companies within 30 days of passing the resolution.
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9.
|
Pay
the requisite fees, as prescribed by the Companies (Registration Offices and Fees)
Rules, 2014.
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10.
|
Fees
can be paid through Credit Card / by cash / by cheque in favour of “MCA
Collection Account ICICI Bank” at the prescribed rates. http://www.mca.gov.in/Ministry/pdf/tableoffee_01042014.pdf Table of Fees given on this
Link.
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(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company
Secretary in Practice from Delhi and can be contacted at
csdiveshgoyal@gmail.com) Disclaimer: The entire contents of this document have
been prepared on the basis of relevant provisions and as per the information
existing at the time of the preparation. Though utmost efforts has made to
provide authentic information, it is suggested that to have better
understanding kindly cross-check the relevant sections, rules under the Companies
Act, 2013. The observations of the author are personal view and the authors do
not take responsibility of the same and this cannot be quoted before any
authority without the written
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