Where Section 169 of the Companies Act, 2013 section 284 of the Companies Act, 1956 deals with the removal of Directors. As per Section 169 of the Companies Act, 2013, the right of the shareholder to remove a director in the general meeting through an Ordinary Resolution is a legal right. This right cannot be curtailed by any of the provision of the MOA/AOA or any other document or agreement.
Private Limited company is empowered to remove its directors before the expiry of their term, the powers of which is vested with the shareholders. This article deals with the process of removal of directors in a company. Non-compliance with any of the stipulated processes can make the decision void if appealed in a court.
There are three possible cases during the removal of a director:
Where the Director himself gives his resignation
The concerned director submits his resignation to the Board. In this case, the following steps will be taken to remove his name from the register of directors:
- The company will hold a Board Meeting by giving 7 days of clear notice (Clear notice means 21 days notice excluding the day on which the notice was sent and received.)
- When the Board meets, will discuss amongst themselves and decide whether to accept the resignation or not.
- Once the Board accepts the resignation of the director they will pass a Board resolution accepting the resignation in the following way:
- “RESOLVED THAT the resignation of <Director name> be and is hereby accepted with immediate effect <Date>. <Download Format>
- “FURTHER RESOLVED THAT the Board places on record its appreciation for the assistance and guidance provided by MR. XYZ during his tenure as Director of the Company”
- “RESOLVED FURTHER THAT directors of the company be and are hereby jointly authorized to do all the acts, deeds and things which are necessary to the resignation of an aforesaid person from the directorship of the Company
- After the passing of the resolution, form DIR – 11 has to be filed by the outgoing director along with the Board Resolution, Proof of delivery of the resignation letter and copy of the resignation letter.
- While the filing of DIR – 11 is the responsibility of the director, form DIR – 12 is the responsibility of the company which has to be filed with the Registrar of Companies along with the Resignation letter and the Board Resolution.
- After filing all the forms, the name of the director will be removed from the master data of the Company on the Ministry of Corporate Affairs website.
To remove a Director suo-moto by the Board
A Company has the authority to remove a Director by passing an Ordinary Resolution, given the Director was not appointed by the Central Government or the Tribunal.
- A Board Meeting will be called by giving seven days’ notice to all the directors. A special notice will go to the directors informing them about the removal of the director.
- On the day of the Board Meeting, a resolution for the holding of an extraordinary general meeting will be passed along with the resolution for the removal of the director subject to the approval of the shareholders.
- A general meeting will be held by giving 21 days clear notice. In the meeting, the members will be asked to vote on the matter. If the majority is in favor of the decision, the resolution will be passed.
- Before the passing of the resolution, an opportunity of being heard will be given to the director.
- After the passing of the resolution, the same procedure will be followed, and the forms DIR – 11 and DIR – 12 will be filed along with the same attachments of the Board Resolution, Ordinary Resolution.
- After the filing of the forms, the name of the director will be struck off from the Ministry of Corporate Affairs website.
In case the Director does not attend three Board Meetings in a row
As per section 167 of the Companies Act, 2013 if a Director does not attend a Board Meeting for 12 months, starting from the day on which he was absent at the first board meeting even after giving due notice for all the meetings, it will be deemed that he has vacated the office and a Form DIR – 12 will b filed on his name and his name will b removed from the Ministry of Corporate Affairs.
Consequences of not or late filing of FORM DIR-12:
If the company not filed the e-form DIR-12 within 30 days of appointment/Resignation, then penalty will be applicable as follows;
- Up to 15 Days then One time of actual Govt Fees
- More then 15 Days – 30 Days then 2 times of Actual Govt Fees
- More then 30 Days – 60 Days then 4 times of Actual Govt Fees
- More than 180 Days then 10 times of Actual Govt Fees
If company fail to file DIR 12 within 300 Days from date of passing a resolution then company need to pay 12 times of Actual Govt Fees plus Compounding offense.
- Notice Calling Board Meeting:
Date of issue of Notice
Name of Director
Address of Director
NOTICE FOR THE MEETING OF THE BOARD OF DIRECTORS OF Name of Company———————- LIMITED
Dear Mr. Name of Director,
Notice is hereby given that a meeting of the Board of Directors of the Company shall be held as per the following schedule:
Date: of Meeting
Time: of Meeting
Venue: of Meeting
The agenda for the meeting is enclosed.
You are requested to make it convenient to attend the above meeting.
For Name of company LIMITED
Name of Director
Add: of Director
- AGENDA OF BOARD MEETING:
AGENDA FOR THE MEETING OF BOARD OF DIRECTORS TO BE HELD ON
————DAY OF———-MONTH, 2014 AT ————-TIME OF MEETING
AT ADDRESS OF PLACE OF MEETING
- To Appoint Chairman of the meeting.
- To Grant leave of absence.
- To Confirm minutes of the previous Board Meeting.
- To ADD MORE AGENDA’S ACCORDING TO REQURIEMENT
- To give Vote of Thanks.
Name of Director
Add: of Director
- ATTENDENCE SHEET OF BOARD MEETING:
ATTENDANCE SHEET OF THE MEETING OF BOARD OF DIRECTORS OF M/S NAME OF COMPANY LIMITED HELD ON ———DAY OF————MONTH OF, 2014 AT REGISTERED OFFICE OF COMPANY.
- Name of Director
- Name of Director
- Name of Director
- If any;
- LEAVE OF ABSENSE:
Mr. Name of director who is on leave
Address of Director.
Date of Leave of Absence before Meeting
The Board of Directors
M/s NAME OF COMPANY LIMITED
ADDRESS OF REGISTERED OFFICE
Subject: Leave of Absence
With reference to the board meeting of the company to be held on date of mewing, it is hereby submitted that due to preoccupations, I am not in a position to attend the same. You are requested to grant the leave of absence.
Name of Director who is on leave
Address of Director
- RIGHT ISSUE RESOLUTION OF BOARD MEETING:
CERTIFIED COPY OF RESOLUTION PASSED IN THE BOARD MEETING OF DIRECTORS OF NAME OF COMPANY LIMITED HELD ON ———-DAY OF—————MONTH, 2014 AT PLACE OF MEETING.
“RESOLVED THAT in pursuance of Section 62 of the Companies Act, 2013 read with The Companies (Share Capital and Debenture) Rules, 2014 the approval of the Board be and is hereby accorded to the Company to issue ————-No. of equity shares of Rs. ———— each (hereinafter referred to as new shares) of an aggregate nominal value of Rs. ———————————(Rupees in Word), for cash to the shareholders at a premium of Rs. —————(if any) per share determined by the Chartered Accountants firm, which was accepted by the Board of Directors as reasonable and in the interest of all concerned, such issue to be made on the following terms and conditions:-
- The issue of shares will be made in the proportion of one new share for every one equity share held on DATE OF MEETING.
- The said offer to the members shall be made by an offer letter which shall indicate the number of shares held by each member and the number of shares to which each is entitled as rights shares, the value per share and the total amount due in case the offer of shares is accepted in full.
- The aforesaid offer shall be valid upto the MAXIMUM 30 DAYS , and includes a right exercisable by the person to whom the aforesaid offer being made to renounce the new shares offered to him in favour of any other person.
- The offer after the expiry of the MAXIMUM 30 DAYS FROM MEETING or on receipt of earlier intimation from the person(s) to whom such notice was given that he declines to accept the new shares offered, the Board of Directors of the company be authorized to dispose of unsubscribed part of the new shares in such manner as they think most beneficial to the company.
- The Equity Shares so issued shall upon allotment have the same rights of voting as the existing equity shares and be treated for all other purposes pari-passu with the existing equity shares of the Company and that the equity shares so allotted during the financial year shall be entitled to dividend, if any, proportionately in the year of the allotment of these shares.
- The allotment of further shares to Non-Residents members shall be in accordance with the Regulations issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999.
- Share Certificates shall be issued to those to whom the further new shares are allotted within the time prescribed in the Companies Act, 2013.
RESOLVED FURTHER that the Board of Directors be and is hereby authorize to take all steps to implement the above resolutions, finalize and issue the letter of offer of rights and take all actions in connections with the further issue and allotment of shares to the members and others where applicable”.
Certified true copy
For NAME OF COMPANY Limited
NAME OF DIRECTOR
ADDRESS OF DIRECTOR
- SHARE APPLICATION FORM:
|From:||NAME OF SHARE HOLDER
ADDRESS OF SHARE HOLDER:
|To:||The Board of Directors,
NAME OF COMPANY,
|ADDRESS OF REGISTERED OFFICE|
We hereby apply for the _________Shares of the Company, having a face value of Rs __/- per __, as stated below in BLOCK 3. We have remitted the amount specified in Block 5 being the amount payable on application @ Rs ——-/- per equity share (inclusive of share premium of Rs—————-/- per share).
We agree to accept the equity shares applied for or such lesser number as may be allotted to us by the Company subject to the terms and conditions set forth in letter of offer and mutually agreed between us and the and the Company subject to the provisions of Foreign Exchange Management Act, 1999 and the Rules /Regulations/Notifications/Guidelines issued by the Govt of India/Reserve Bank of India in this behalf and the provisions of the Companies Act, 2013 and the rules and regulations made thereunder and the provisions of the Memorandum and Articles of Association of the Company, this Application Form, Share Certificates and any other Law, Rules and Regulations and other documents as may be relevant/applicable, if any,
We undertake that we will comply with the aforesaid as may be applicable to us from time to time and will sign all such other documents and do all such other acts, deeds and things, if any, that may be necessary on our part in this regard and to enable us to be registered as the holder(s) of the equity shares which may be allotted to us by the Company. We authorize you to place our name(s) on the Register of Members of the Company as the holder(s) of Equity Share(s) that may be so allotted to us.
We hereby enclose Board Resolution authorizing the investment as give below:-
|REGD. FOLIO NO.
|NO. OF EQUITY SHARES HELD
|NO. OF EQUITY
SHARE (S) APPLIED
@ Rs 275/- PER EQUITY SHARE
|AMOUNT PAID ON APPLICATION
@ Re. 275/- PER EQUITY SHARE
|Amount paid (Currency and also equivalent Rs. in Words)|
(Name of Bank and Branch)
|By Cheque / Draft / T.T.
Wire transfer /
|Payable at/transferred to
(Name of Bank and Branch)
SIGNATURE (with Company stamp/seal)
Specimen signature of applicant
- REJECTON FROM EXISTING SHARE HOLDER:
Date: (______) (14th May onwards)
The Board of Directors,
Name of Company,
Register office address of company
Subject: Non-acceptance of offer of Right Issue made to the Company
I received a letter of offer regarding issue of equity shares on right issue basis in proportion to one equity share for each equity share held by the me. I does not intend to accept this offer.
This is for your record and reference.
Name of Shareholder
Address of Shareholder
- ACCEPTANCE FOR SHARHOLDER:
Name of Shareholder
Address of Share holder
Acceptance of offer letter
- I am holder of ———–equity shares of Rs———–/- each in
Name of Company.
- I received a letter of offer from Name of Company regarding issue of equity shares on right issue basis in proportion to one equity share for each equity share held by the Company
- I intends to subscribe to —————- No. of Equity Shares new equity shares of of Rs.=———- each at a premium of Rs. —————— per share in the share capital of Name of Company by the me amounting to INR —————–.
- I intended to provide a capital injection of INR —————– in Name of Company after receiving the capital injection of ——————— from its other share holders.
Dated this day of
Name of Shareholder
Address of Shareholder
- RESOLUTION FOR ALLOTMENT OF SHARES:
CERTIFIED COPY OF THE RESOLUTION PASSED IN THE BOARD MEETING OF NAME OF COMPANY HELD ON ————–DAY OF ———–MONTH ————YEAR, AT REGISTERED OFFICE AT ADDRESS OF REGISTERED OFFICE.
“RESOLVED THAT in terms of authority given to the Board by the Articles of Association of the Company, NAME OF SHARHOLDER be and is hereby allotted and issued ——————— (No. of Equity Shares) equity shares each having a nominal value of Rs——-/-(———- Only) at a price of Rs. ——————/- (Rupees ————————- Only) per share, -in lieu of subscription monies of Rs. ——————/- ———- received from it as per the details given below:
|Name of Subscriber||No. of shares||Dist. Nos.||Nominal Value||Certificate No.||Folio No|
RESOLVED FURTHER THAT the above equity shares so issued and allotted Name of shareholder shall be subject to the provisions of the Memorandum and Articles of Association of the Company.
RESOLVED FURTHER THAT, a letter of allotment in relation to the above equity shares issued and allotted as aforesaid be issued to name of shareholder by the Company.
RESOLVED FURTHER THAT name of directors of company or any other Director of the Company be and is hereby authorized to do all such acts, deeds and things as may be required to be done to give effect to the above resolution, including issuance of duly stamped share certificates in relation to the above equity shares issued and allotted as aforesaid to name of shareholder in accordance with the provisions of the Companies Act, 2013 and rules made there under and the Articles of Association of the Company and do all other acts consequent to the issuance and allotment, including, in particular the payment of the requisite stamp duty, for issuing duly stamped share certificates evidencing the allotment of equity shares and give such directions as may be required, necessary, expedient or desirable for giving effect to the aforesaid resolutions.”
CERTIFIED TRUE COPY
For NAME OF COMPANY
NAME OF DIRECTOR
ADDRESS OF DIRECTOR
- RESOLUTION FOR SIGNATURE OF SHARE CERTIFICATE
RESOLVED FURTHER THAT the share certificates be issued under the Common Seal of the Company, under the signature of name of directors of company, Directors of the Company, and ———————————— as authorized signatory.
Author of all avobe format – CS Divesh Goyal
Managing Director is Key Managerial Personal of utmost importance. He is face of a company and its decision-making mechanism.
The executive management of a company is responsible for the day to day management of a company. The companies Act, 2013 has used the term key management personnel to define the executive management. The key management personnel are the point of first contact between the company and its stakeholders. While the Board of Directors are responsible for providing the oversight, it is the key management personnel who are responsible for not just laying down the strategies as well as its implementation.
Key Managerial Personnel
The Companies Act, 2013 has for the first time recognized the concept of Key Managerial Personnel. As per section 2(51) “key managerial personnel”, in relation to a company, means—
(i) the Chief Executive Officer or the managing director or the
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed.
Section 2(54) of the Companies Act, 2013, defines ‘managing director’. It stipulates that a “managing director” means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called. The explanation to section 2(54) excludes administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, from the substantial powers of management.
Whole Time Director
Section 2 (94) of the Companies Act, 2013 defines “whole-time director” as a director in the whole time employment of the company.
Section 2(53) of the Companies Act, 2013 defines “manager” as an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, whether under a contract of service or not.
Chief Executive Officer & Chief Financial Officer
Section 2(18)/(19) of the Companies Act, 2013 defined “Chief Executive Officer”/ “Chief Financial Officer” as an officer of a company, who has been designated as such by it;
Section 2(24) of the Companies Act, 2013 defines “company secretary” or “secretary” means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries
Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act;
Appointment of Managing Director, Whole-Time Director or Manager
Section 196 of the Companies Act, 2013 provides that no company shall appoint or employ at the same time a Managing Director and a Manager. Further, a company shall not appoint or reappoint any person as its Managing Director, Whole Time Director or manager for a term exceeding five years at a time and no reappointment shall be made earlier than one year before the expiry of his term.
Section 196(4) of the Companies Act, 2013 provides that subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in Schedule V. Approval of the Central Government is not necessary if the appointment is made in accordance with the conditions specified in Schedule V to the Act.
Therefore, the appointment of a managing director or whole-time director or manager and the terms and conditions of such appointment and remuneration payable thereon must be first approved by the Board of directors at a meeting and then by an ordinary resolution passed at a general meeting of the company.
A notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any. A return in the prescribed form viz. MR.1 is required to be filed with Registrar within 60 days from the date of such appointment.
Section 196(5) provides that subject to the provisions of this Act, where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.
(b) the remuneration or commission drawn by the individual
concerned in any other capacity;
(c) the remuneration or commission drawn by him from any other
(d) professional qualifications and experience of the individual
(e) such other matters as may be prescribed.
As per Rule 6 for the purposes of item (e) of section 200, the Central
Government or the company shall have regard to the following matters
while granting approval to the appointment of managing director
under section 196:
(1) Financial and operating performance of the company during
the three preceding financial years.
(2) Relationship between remuneration and performance.
(3) The principle of proportionality of remuneration within the
company, ideally by a rating methodology which compares
the remuneration of directors to that of other executive
directors on the board and employees or executives of the
(4) Whether remuneration policy for directors differs from
remuneration policy for other employees and if so, an
explanation for the difference.
(5) The securities held by the director, including options and details
of the shares pledged as at the end of the preceding financial
Section 196(3) of the Act makes a specific prohibitory provision
with regard to the appointment of managing director, whole time
director or manager. The section lays down that no company shall
appoint or continue the employment of any person as its managing
director, whole time director or manager who—
(a) is below the age of twenty-one years or has attained the age of
Provided that appointment of a person who has attained the
age of seventy years may be made by passing a special resolution
in which case the explanatory statement annexed to the notice
for such motion shall indicate the justification for appointing
(b) is an undischarged insolvent or has at anytime been adjudged
as an insolvent;
(c) has at any time suspended payment to his creditors, or makes,
or has at any time made, a composition with them; or
(d) has at any time been, convicted by a court of an offence and
sentenced for a period of more than six months.
Apart from this, Part I of Schedule V contains five conditions which
must be satisfied by a person to be eligible for appointment as managing
director, whole-time director or manager without the approval of the
Central Government. These conditions are as below:
(a) he had not been sentenced to imprisonment for any period, or
to a fine exceeding one thousand rupees, for the conviction of
an offence under any of the following Acts, namely:-
(i) the Indian Stamp Act, 1899,
(ii) the Central Excise Act, 1944,
(iii) the Industries (Development and Regulation) Act, 1951,
(iv) the Prevention of Food Adulteration Act, 1954 ,
(v) the Essential Commodities Act, 1955,
(vi) the Companies Act, 2013,
(vii) the Securities Contracts (Regulation) Act, 1956,
(viii) the Wealth-tax Act, 1957,
(ix) the Income-tax Act, 1961,
(x) the Customs Act, 1962,
(xi) the Competition Act, 2002,
(xii) the Foreign Exchange Management Act, 1999,
(xiii) the Sick Industrial Companies (Special Provisions) Act,
(xiv) the Securities and Exchange Board of India Act, 1992,
(xv) the Foreign Trade (Development and Regulation) Act, 1992;
(xvi) the Prevention of Money Laundering Act, 2002;
(b) he had not been detained for any period under the Conservation
of Foreign Exchange and Prevention of Smuggling Activities
Provided that where the Central Government has given its
approval to the appointment of a person convicted or detained
under sub-paragraph (a) or sub-paragraph (b), as the case may
be, no further approval of the Central Government shall be
necessary for the subsequent appointment of that person if he
had not been so convicted or detained subsequent to such
(c) he has completed the age of 21 years and has not attained the
age of 70 years:
Provided that where he has attained the age of 70 years; and
where his appointment is approved by a special resolution passed
by the company in general meeting, no further approval of the
Central Government shall be necessary for such appointment;
(d) where he is a managerial person in more than one company,
he draws remuneration from one or more companies subject
to the ceiling provided in section V of Part II;
(e) he is resident in India.
Explanation : For the purpose of above, resident in India includes
a person who has been staying in India for a continuous period
of not less than twelve months immediately preceding the date
of his appointment as a managerial person and who has come
to stay in India:
(i) for taking up employment in India, or
(ii) for carrying on a business or vocation in India.
But this condition shall not be applicable to the companies in
Special Economic Zones, as may be notified by Department of
Commerce from time to time.
However, a person, being a non-resident in India, shall enter
India only after obtaining a proper Employment Visa from the
concerned Indian mission abroad. For this purpose, such person
shall be required to furnish, alongwith the visa application form,
profile of the company, the principal employer and the terms
and conditions of such person’s appointment.
Reappointment of Managing Director
Under sections 196 and 203 of the Companies Act, 2013, appointment includes reappointment. Reappointment of a managing director of a company must be taken for consideration before the expiry of his term of office. If the reappointment of the managing director is approved and if it is not in accordance with the conditions specified in Schedule V then the approval of the Central Government must be obtained for such reappointment. Rest of the provisions for reappointment of a managing director are same as in the case of appointment of a managing director.
Appointment of Key Managerial Personnel
Section 203 of the Companies Act, 2013 read with Rule 8 mandates
the appointment of Key Managerial Personnel and makes it obligatory
for a listed company and every other public company having a paidup
share capital of rupees ten crores or more, to appoint following
whole-time key managerial personnel:
(i) managing director, or Chief Executive Officer or manager and
in their absence, a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Officer:
Every whole-time key managerial personnel of a company shall
be appointed by means of a resolution of the Board containing the
terms and conditions of the appointment including the remuneration.
An individual shall not be appointed or reappointed as the
chairperson of the company, as well as the managing director or Chief
Executive Officer of the company at the same time unless the articles
of such a company provide otherwise; or the company does not carry
multiple businesses. However, such class of companies engaged in
multiple businesses and which has appointed one or more Chief
Executive Officers for each such business as may be notified by the
Central Government are exempted from the above.
A whole-time key managerial personnel shall not hold office in
more than one company except in its subsidiary company at the same
time. However, he can hold such other directorship with the permission
of the Board.
A whole-time key managerial personnel holding office in more than
one company at the same time, shall, within a period of six months
from such commencement, choose one company, in which he wishes
to continue to hold the office of key managerial personnel.
A company may appoint or employ a person as its managing
director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment
is made or approved by a resolution passed at a meeting of the Board
with the consent of all the directors present at the meeting and of
which meeting, and of the resolution to be moved thereat, specific
notice has been given to all the directors then in India.
If the office of any whole-time key managerial personnel is vacated,
the resulting vacancy shall be filled-up by the Board at a meeting of
the Board within a period of six months from the date of such vacancy