Procedure for Removal of Director

Introduction

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. [Section 169(1)]

An Independent Director re-appointed for second term shall be removed by the Company only by passing a Special Resolution and after giving him a reasonable opportunity of being heard. [Section 169(1) First Proviso]

Mandatory Requirements

1. A special notice shall be required to remove a Director.
2. A special notice required to be given to the Company shall be signed, either individually or collectively by such number of members holding not less than one percent of total voting power or holding shares on which an aggregate sum of not less than five lakh rupees has been paid up on the date of the notice. [Section 115 and Rule 23(1) of the Companies (Management and Administration) Rules, 2014]
3. A vacancy created by the removal of a director 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.
4. 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.
5. The Director so removed shall not be re-appointed as a Director by the Board of Directors.

Following Procedure is to be followed [Section 169]

1. Special Notice by the Members [Section 115, 169(2) and Rule 23 of the Companies (Management and Administration) Rules, 2014]
   A special notice shall be required to remove a director or to appoint somebody in place of a director so removed, at the meeting at which he is removed. Such notice shall be sent by members to the Company not earlier than three months but at least fourteen days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting.
2. Disclosure to the Stock Exchange by Listed Company [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   Listed Company shall submit the disclosure of receipt of special notice to remove a director to the Stock Exchange within 24 hours from the receipt of Notice and post the same on the website of the Company within 2 working days.
3. Obtain Written Consent and Declaration from the Proposed Director [Section 152 and 160]
   If members send a special notice for appointing a new director in place of the one who is proposed to be removed, then such notice shall be accompanied by a deposit of Rs. 1 lakh per candidate. And along with that the Proposed Director has to submit Form DIR-2 (Consent to act as a Director) and Form DIR-8 (Intimation by Director about his disqualification) to the Company.
4. Convene a Meeting of Board of Directors [As per section 173 & Secretarial Standard-1 (SS-1)]
   • On receipt of the Special Notice, Company shall issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors of the Company
     • to take note of the Special Notice for removal of Director given by the members of the Company and forthwith send a copy thereof to the Director concerned and he shall be entitled to be heard on the resolution at the meeting.
     • to fix day, date, time and venue for holding General Meeting of the Company.
     • to approve the draft notice of General Meeting and to authorize CS or CFO or any Director of the Company to issue the notice of General Meeting.
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
5. Convene General Meeting [Section 96, 100 and SS-2]
   • Company shall give its Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive, the notice of the resolution at least seven days before the meeting, exclusive of the day of dispatch of notice and day of the meeting, in the same manner as it gives notice of any General Meetings.
   • Where it is not practicable to give the notice in the same manner as it gives notice of any General Meetings, the notice shall be published at least 7 days before the meeting 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 and such notice shall also be posted on the website of the Company.
   • Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
   • Hold the General Meeting on fixed day and pass an Ordinary Resolution for Removal of Director (Special Resolution shall be passed for removing an Independent Director, serving his second term) after giving him an opportunity of being heard or Appointment of Director in place of removed director.
   • Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall inform the Stock Exchange about appointment of Director within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
   • Listed Companies shall submit to the stock exchange the details of the voting results within 48 hours from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
   • Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
6. File Form MGT-14 with ROC
   File Form MGT-14 with the ROC within 30 days of passing Special Resolution (for removing an Independent Director, serving his second term) in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments
   • Certified True Copies of the Special Resolution passed for removing an Independent Director along with Explanatory Statement.
   • Copy of the Notice of meeting sent to members along with all the annexure
   • Copy of Attendance Sheet of General Meeting
   • Any other attachment as may be applicable.
7. File Form DIR-12 with ROC
   Company shall file Form DIR-12 for cessation of office of the Director or appointment of Director within 30 days of General Meeting along with the following documents
   • For Cessation of Director
     • Certified true copy of Ordinary Resolution / Special Resolution
     • Certified true copy of Special Notice.
   • For Appointment of Director
     • Certified true copy of Ordinary Resolution
     • Details of Interest in other entities
     • Form DIR-2- Consent to act as a Director
     • Form DIR-8-Intimation by Director about his disqualification.
8. Making Necessary entries in Register of Directors
   Company should make necessary entries regarding appointment/removal of Director in the Register of Director and Key Managerial Personals and Register of contracts and arrangements in which directors are interested in Form MBP-4.
9. File Necessary Amendment Application under following Acts
   • Goods and Services Act
   • Shops & Establishment Act
   • Factories Act
   • Foreign Exchange Management Act
   • Inter-State Migrant workmen Act
   • Private Security Agency Act
   • EPF
   • ESI
   • Other Labour Laws
   • Industry Specific Laws