Whether Director of a Company can be Removed?
Introduction : It is necessary to know that whether a director can be removed from organization, if yes whether shareholder has such power or the authority lies with company only? What will be the process for removal of director? In this article we will cover entire provisions relating to removal of directors.
Who can remove director of company?
Directors of company can be removed by shareholders of the company and in case of special circumstances it may happen that, they are removed by tribunal by passing order for their removal.
How shareholders can remove the director?
Shareholders will be required to pass ordinary resolution for removing director; if removal is for Independent director who was re-appointed than in such case special resolution will be required for their removal. It shall be noted that if director was appointed by Tribunal or it is appointed by virtue of principle of proportional representationthen such directors cannot be removed.
Illustration: R Ltd. has seven directors on board; 3 of them were appointed by virtue of principle of proportional representation, one of them was appointed by the order of tribunal; How many directors can be removed from company?
In the given case, three directors can be removed by the company as it has been specifically stated that if director was appointed by Tribunal or it is appointed by virtue of principle of proportional representation then such directors cannot be removed.
What if amongst the remaining three one was Independent Director and he was recently re-appointed?
In such case, shareholders can remove such director by passing special resolution. For the remaining two directors, if shareholders want to remove them than in that case, they will be required to pass ordinary resolution.
Whether director who is going to be removed will be provided with opportunity of being heard?
Any director whether being independent or not, who is proposed to be removed shall be provided with opportunity of being heard before his removal.
Whether there is any special formality required to be completed by shareholders for proposing removal of director?
It has been stated that a special notice will be required for proposing removal of director; such special notice is required to be signed by
i) Members holding not less than 1% of total votingpower; or
ii)Members holding shares on which at least Rs. 5,00,000 has been paid in theaggregate.
Time limit to send such notice shall be keep in mind; it shall be sent to all the members at least 14 days before the meeting at which the resolution is desired to be moved.
Whether notice is required to be sent to director who is proposed to be removed?
In case of every removal of director, the above-mentioned special notice is also required to be sent to director who is proposed to be removed, (may or may not be the member of the company) and the at time of such resolution opportunity
Whether director who is proposed to be removed can make written representation?
Right has been provided by the director to make a written representation to the company and he may request the company to circulate such representation with the notice of meeting proposing his/her removal. Company shall circulate representation of facts of representation along with special notice; and if due to limitation of time or due to company’s default director along with his right of opportunity of being heard he will be allowed to be heard orally about his representation at meeting.
What if such representation is abused to secure needless publicity for defamatory matter?
If on an application made by the company or by any other aggrieved person if tribunal is satisfied that the rights of representationare being abused to secure needless publicity for defamatory matter than Tribunal may order that representation need not be sent out and read out at the meeting and may also ask to pay monetary compensation to company.
What process is to be followed after removal of director?
If the resolution proposed for removal of director is passed such vacancy will be treated as causal vacancy and the process described under our article relating to causal vacancy director is to be followed.