Removal of Director (DIR-12)

A director within a company may opt to resign, or the Board of Directors might seek to remove a director for various reasons. The director has the option to step down by submitting a resignation letter to the company and concurrently notifying the Registrar of Companies (ROC) of the same.

Upon submitting written notice to the company, a director may proceed with the resignation process. The Board is mandated to inform the Registrar of Companies (ROC) about this notice within 30 days through the submission of Form DIR-12. Optionally, the director can also forward a copy of the resignation letter to the ROC along with the reasons for resigning, utilizing Form DIR-11.

Obligations for the Company:

Upon receiving the resignation notice, the Board of Directors must duly consider it and pass a resolution for accepting the resignation. It is imperative to draft the minutes of the Board of Directors’ meeting.
In accordance with Rule 15 of the Companies Act, 2014, the Registrar must be informed through Form DIR-12 within 30 days from the date of receiving the resignation.
The resignation should be explicitly mentioned in the Director’s report during the annual general meeting, and it should also be prominently displayed on the company’s website.
When filing DIR-12, the company is required to include the following documents:
– The resignation notice (Compulsory)
– Evidence of cessation (Either the board resolution or the acceptance letter can be attached)

Director’s Liability after Resignation

Once a director has resigned, and the Board has accepted the resignation, the director is not held liable for any liabilities incurred by the company after the acceptance date. However, the director remains liable for any offenses that occurred during their tenure as a director of the company.

Process for Director Removal

A company can remove its directors before the expiration of their term, and these powers are vested with the shareholders. The process for removing directors is outlined below. Non-compliance with any step can render the decision void if appealed in court.

Basic Prerequisite

The process of removing a director cannot be initiated without providing the director an opportunity to be heard. This opportunity for the defendant or defaulter is a fundamental requirement in accordance with the laws.

Issuing Notice

The removal process must begin with a notice. Shareholders holding a minimum voting power of 1% or those holding shares with an aggregate sum of not more than Rs. 5,00,000 on the notice date should initiate this special notice. It must be signed by all members and delivered to the company at least 14 days before the resolution is passed at the meeting. The notice is invalid if not issued within three months of the meeting date.

Notice to Members

A copy of the notice must be sent to the director who will be heard on the resolution at the meeting, whether or not the director is a member of the company. The notice should be served at least seven days before the meeting date. If shareholders cannot deliver the notice, it can be published in two newspapers, one in English and one in the vernacular language, and posted on the company’s website at least seven days before the meeting.

Representation in Writing

The concerned director has the right to make a representation against the removal notice. The director can request the company to send the representation to all members. Additionally, members should be notified of the representation through a notice. If the company is unable to reach all members, the director may request the reading of this representation.

Documents required for director resignation?

• Documents required from Director: Resignation Letter
• Documents required from Company: Board meeting Resolution for Resignation, Minutes and Resignation Acceptance Letter.