Removal of Director

Directors can be added or removed from a company at any point. Various reasons prompt director removal, each with its own procedure. Regardless, LegalEfilings can assist in director removal, simplifying the entire process for you.

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Process to Remove Director

Overview of Removal of Director

Within corporate governance, the bond between shareholders and directors stands as a cornerstone for a company’s prosperity. Shareholders, as proprietors, hold stakes symbolizing their ownership, whereas directors wield the duty of steering and pivotal decision-making on behalf of the company. Nonetheless, situations may arise where shareholders find it imperative to oust a director from their role. In this article, we delve into the procedure of shareholder-initiated director removal, the underlying motivations, mandated procedures, and other pivotal facets surrounding this significant verdict.

Reasons for Director Removal

If they incur any of the disqualifications specified under the Companies Act
If they absent themselves from board meetings over 12 months
If they enter into contracts or arrangements against the provisions of Section 184 of the Companies Act
If they are disqualified by an order of a court or tribunal
If they are convicted by a court of any offence and sentenced to imprisonment for not less than six months
If they have not abided by the terms and protocols mentioned in the Companies Act of 2013
If they have resigned voluntarily from their position.

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Documents Required

Why changing directors is required ?

Hire new talent on board: With the growth of business, strategies and alliances are developed, that requires inputs of each department are required for effective planning. Also, with an addition of the new product line or department, an expert to lead the team can be hired in a managerial position being director of the company. This benefits the company with specialization and focused efforts

Assign operational responsibility without dilution ownership: Directors are responsible for day-to-day operations. With the appointment of an additional director, the shareholders can assign the operational responsibilities to directors keeping strategic control in hand. Here, a director does not require subscribing to share capital, hence, the ownership and voting rights of shareholders does not dilute with a new person on Board.

Inability to work by existing directors: The existing directors may be unable to serve the company after a certain period due to retirement or other personal reasons. Whether it is a resignation by the director or his death, the company needs to make sure that its work is unaffected. It needs to process for both discontinuations by director and appointment of a new director if any.

Number of directors fall under statutory limit: The Companies Act has prescribed the minimum number of directors in any company, which is 2 and 3 for Private and Public company respectively. At any time during the company’s existence, the number of directors shall not reduce below from the limit. The company must appoint a new director(s) within 6 months if the number reduces below 2/3.

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Frequently Asked Questions

How can a director of a company be removed?

A director can be removed in three ways:

By the director by giving their resignation
If the director is absent from board meetings for 12 months
By the shareholders, if they deem it necessary.

Yes, a company director can be removed without their consent. However, such removal calls for a strict procedure to be followed.

What is the minimum number of directors a company should have?

The minimum number of directors required is based on the type of company. For a one-person company, it is 1, for a private company it is 2, and a public company needs to have at least 3 directors.

Who can't be a director of a company?

A person cannot be appointed as a director if they don’t qualify under the AoA, if they are undischarged bankrupt, or if they are restricted by a court order.

It is similar to a PAN Card number.DIN is to be mentioned in documents while appointing a person as a director of a company.

What is the maximum number of directors in a company?

A private company can have a maximum of 15 directors.

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