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COMPANY DIRECTOR CHANGE


Change of director implies the addition or removal of the director in the company. The board of directors are generally empowered to appoint a director because of casual vacancy caused due to resignation of an existing director. However, such as the appointment of new director by the Board of Directors need to be ratified by the shareholders in a valid Extra-Ordinary General Meeting.



Learn the stepwise procedure to change a director


• Appointment of Director by the Board
• Resignation of Director
• Removal or Termination of Director
• How to make DIN for a new director

About Participation in the Removal of the Director of a Company



• The Stockholders who are keeping shares not less than a sum of Rs 5,00,000 as a paid-up capital shares on the period of notice or are holding not less than 1% of the total voting power, can send a special announcement to the company for 'removal of the director.'


• Shareholders concede the power to decide the date of the meeting. However, the particular notice shall not be sent earlier than three months from the time of the meeting, although the resolution is to be moved at least 14 clear days before the date of the session.


• The considered director has given the option of being heard at the meeting before the board of the directors. If the objects are validated by the stockholders and the board of the directors, then they can eliminate the procedure of the removalof Director after consideration.





Understandings behind Resignation of Directors


Dispute With The Board


When many directors work commonly, a difference of opinion ought to happen. It results in hindering the overall performance of the corporation; in such a position, the directors may be removed with due considerations.

Misuse In The Company Affairs


When a director gets introduced to the illegal practices of the company, he may find himself becoming dragged into it that matches his reason for resignation. To defend the circumstances appearing out of such activities, he may be removed by due considerations.

The Recession Of Nomination


It is only appropriate to the Nominee directors who primarily get appointed by the NBFC’s investors on the BOD. Once the transaction between the company and entity is complete, the Nominee director can resign, or he may also leave after the removal of nomination.




What is the Eligibility Criteria to be a Director?


Age Demarcation


There is no alternate fixed age for being a director, but it is essential that the person who should be competent to enter into any contract. Moreover, in a matter of 'managing director,' 'full-time' director, or 'independent' director of a recognized company, the person becomes eligible to be a director if he is of 21 years and has not reached the age of 70 years officially.

DIN Needed


To be eligible to be designated as a company's director, the person must get a Director Identification Number. The main intention behind having a DIN is to make assured that fake directors do no fraud, and in case anyone ventures any such criminal activity, they can be traced within this unique number.

Limit Of Valid Directorship


A personality can only be a director of 20 separate companies at a time. Out of these 20 companies, only ten can be public companies.

Determination Of Nationality
There is no restriction. However, there must be a minimum of one Indian director in the company.




Ineligibility


Unsound Mind Or Bankrupt Person


Anybody who is of unsound mind or is incompetent of making decisions on his own cannot be appointed as a director. This involves children, mentally disabled individuals, and frames with unstable mental faculties. Furthermore, insolvent people or individuals who have maintained bankruptcy claims in the court of law are disqualified from acting directors.

Criminal Background


If a personality has a criminal record and was sentenced to confinement for more than seven years or more, he cannot be a director.

Pending Overdue Returns


If the individual has not met previous returns in any of the preceding years, he shall be barred from keeping the directorial position.




Provisional Aspects: Removal of Director under Companies Act 2013


1. Section 169(1)


• An general resolution is needed;
• Director assigned/apointed by Tribunal under section 242 shall not be removed;
• Reappointed Independent Director shall be removed by 'Special Resolution'.
• Section 169(1) will not be effective if directors are appointed according to the principle of proportional representation (S.163).

2. Section 169(2)


• Special notice is needed for a resolution to remove a director or to designate somebody in his position.

3. Section 169(3)


• The Company should attempt to send the Special notice along with the intention of removal to Director along with opportunity of being heard is provided to him at the meeting.

4. Section 169(4)


• For representation, Director should give it in writing to the Company and request to notify it to the members.

• if Tribunal is satisfied, Company shall not assign the representation and shall not read it out at meeting

5. Section 169(5)


• The opening generated by the removal of Director can be filled by the same meeting if 'special notice' is given under 'section 169(2)'.

6. Section 169(7)


• Director removed cannot be reappointed as Director to fill the casual vacancy.

7. Section 169(8)


• Director discharged shall be entitled to payment as per the terms of contract or terms of his employment, if any.

• Director can be removed under any additional provisions of this act.

8. Rule 79 Of NCLT Rules 2016


• The Company or any other personality who claims to be aggrieved may make an appeal to the Tribunal in Form 'NCLT-1'.

9. Checklist


• File Form DIR-12 within '30 days' from the date of General Meeting with following attachments:
• Special Notice of the Shareholders proposes to remove the Director.
• Notice of General Meeting with explanatory Statement.
• Copy of ordinary Resolution passed at EGM.
• Notice sent to Director concerned.




Recognition: Types of Director



• As per 'Section 149(1)' of the Companies Act, 2013, every public corporation shall have a minimum number of 3 directors, whereas the least amount of directors in a private company is two and only one director in case of the 'One Person Company.'
• The highest number of directors in a public company is 15. Besides, a company can also select more than 15 directors after getting a permit from a specific resolution in the general meeting.


• A director can determine the maximum number of directorships up to 20, including any alternative directorship of a person.
• In the event of any private company or 'public company,' either holding or subsidiary company shall restrict to10 directorships in the 'public company'.


• All the Certified companies must appoint at least one woman director in the Board of Directors in a year from the enforcement of the second Proviso to Section 149(1) of Companies Act.
• Similarly, every public company having a turnover of Rs. 300 Crore or a paid-up portion capital of Rs. One hundred crores under the latest audited financial statements shall appoint at least one woman director within a year from the convocation of the second Proviso to Section 149(1) of Companies Act.




Manner of Removal of Directors Effecting Companies


Stockholders hold the power to remove a director, as per Section 169 of the 'Companies Act 2013'. The method can be done by passing an ordinary decision in a general meeting, besides in the case, the Director was not appointed by the Central Government or the Tribunal.
• A notice should be attached to all the directors to possess a board meeting by allowing seven days. Moreover, all the directors of the Company will receive information regarding the removal of Director.
• Resulted in the notice, a resolution will be passed for possessing the general meeting. The question of adopting the decision is for the permission of the shareholders on the day when the board meeting will be held.
• There will be a general meeting held after presenting 21 days of the explicit declaration to the directors. The decision will be made based on the majority of the votes.
• In the very first part, the considered Director will get an option and chance for being heard.
• After the declaration of the resolution, the Director should file two forms Form DIR-11 and Form DIR-12 with attachments of the 'Board Resolution.'
• At the utmost, the name of the consent director will be eliminated from the 'Ministry of Corporate Affairs (MCA)' database and consequently on the website too.
The Director of the Company may wishes to resign from the post of a director, then he/she can continue by passing a resolution firstly to the Company
The resignation of a director/managing director, companies act 2013, asserts that the Company has special duties and obligations to fulfil after.
• The first and principal option is to be the Company passing a joint resolution to authorize the notice or letter of resignation and commission to file form DIR11 defining the reasons behind the departure, as per the provision specified in section 168(1) of Companies Act, 2013.
• As per rule '16 of Companies Rule, 2014 (Appointment and Qualification of directors)', the resignation report or notice and ideas for the resignation has to be shared with the Registrar of Companies (ROC) using 'Form DIR11', within '30 days' of the date of removalof Director.
• In extension to filing eForm 'DIR11', the Company requires to provide the notice or letter of resignation necessarily. This is the scheme for the Company through the resignation of the Managing Director; companies act 2013.
• Documents to be submitted are :
Notice of resignation filed with the Company
Proof of dispatch
Acknowledgment of form, if received.
• If a director didn't serve the Board meeting for 12 months, then the defection has to be taken severely. The duration is measured from the day on which he/she was not accessible from the first meeting and to any of the assemblies, even after granting him/her due notice for all the sessions. It will be noted that he/she has abandoned the office, and several steps will be taken as per section 167 of the Companies Act, 2013. Correspondingly, a Form DIR-12 should be applied on the missing Director's name. Further, after the formalities, the respective Director's name will be removed from the Ministry of Corporate Affairs.


Overview on Removal of Director

Each private company should have a least of two directors, whereas a public corporation shall have a least of three directors. A Private company can remove a director if he catches any of the incompetence specified under the Act, absents himself/herself from board adherence over 12 months. It enters into agreements or arrangements against the provisions of section 184. However, it gets excluded by order of a court or Tribunal or is convicted by a court of any crime and sentenced to imprisonment for not less than six months.



Consequences of not filing the form DIR-12

In 30 days of date of the resignation, if the company fails to or doesn’t file the 'form DIR-12', the below mentioned penalty will be applied.
• One-time of concrete Government fees until 15 days;
• If it surpasses more than 15 days, then it’s two times of the original government penalty;
• A penalty of 4 times of the exact government charges is applicable if it passes 30 days to 60 days;
• In case it surpasses 180 days, then ten times of the actual administration fees are relevant;
• The penalty is also relevant to the company, which fails to file the form DIR -12 within 300 days from the date of reaching the resolution. The company has to pay 12 times the exact government fees and the compounding offense as well.