The decision to resign should be exercised by the Director. Upon resignation, the Director should prove that the information was delivered to the company and release him/her from any liability in this regard, and from any other events that may occur in accordance with the notification of his intent to resign. When a Director resigns, he/she may either send the resignation letter to the Registrar of Companies within a prescribed period, along with proof of delivery to the company in a prescribed e-form upon payment of the fee, or he/she can serve the resignation letter to the company, which the company can accept and acknowledge and then file the appropriate e-form to remove the Director’s name from the board of directors. Director resignations take effect on the date the company receives the director’s notice, or on the date specified by the director in the notice.
A company’s director can be removed in several ways: 1. Removal by Shareholders 2. Removal by Central Government 3. Removal by Court.
1. Removal by Shareholders (Sec. 284):
In the event of negligence or fraud, the shareholders may remove the director before the term of his office expires. To do so, the company must be notified at least fourteen days in advance of the meeting. On receipt, the company must serve a copy of the notice to the director removal concerned.
When a director sends them a representation, they should be sent to all of the company members. If a director receives the representation late, he/she may ask to have it read at the meeting.
This meeting shall appoint a new director, who will hold office only for the period that the removing director held office.
It is not possible to remove directors appointed by the Central Government, third parties and those elected by proportional representation.
2. Removal by Central Government [Sec. 388 E]:
Whenever there is a complaint against a company’s director, the Central Government can investigate the matter and refer it to the High Court for investigation.
A Central Government investigation is conducted when directors behave fraudulently, negligently, and fail to meet their obligations, or if they do not follow sound business principles in running their business. It is likely that the company’s business is being conducted to defraud the creditors or members of the company, or it is likely to cause serious damage to the trade. For a period of five years following the decision of the High Court, the director cannot serve as director of a company again.
In accordance with the Central Government’s approval, any person may be appointed director of a company.
3. Removal by Court (Sec. 402):
[Secs. 397 and 398] Additionally, the court may remove the director for oppression or mismanagement.
The person who has been so removed cannot seek compensation from the company and cannot become a director of a company for a period of five years following his removal. [Sec. 407]
FAQ On Resignation/Removal Of Director
How does DIN work?
The Director Identification Number, or DIN, is assigned to anyone who intends to be a director in any company. This number can be obtained by filing the appropriate form. We can assist you in obtaining the DIN.
In order to obtain the Director’s Identification Number, what documents are required?
In order to obtain a DIN, a board resolution of the company where the appointment is being made must be passed, and proof of identity and address, as well as a photograph, must be provided.
How long does the director have to file his or her resignation form?
Within 30 days of the director’s resignation, the DIR-12 should be filed.
KYC for directors – what does it mean?
The DIR-3 KYC form or e-portal must be filed by any individual with a DIN number so that the details of the KYC such as their personal details, address, mobile number, and email address can be verified. In order to resign, the director must file a form for resignation if the KYC is incomplete. If the KYC is incomplete, the resignation form cannot be filed.