Generally, a company’s management lies with the company’s Board of directors and they always work for the advancement of the company and its shareholders. The Board of directors of the company are the agents of the company, elected by the shareholders to manage its routine affairs and the provision of the Companies Act, 2013 gave them special rights to protect themselves from the outsiders and the insiders also. In this article we have discussed the step by step procedure for the Removal of a Director (How to remove a Director?) as per the Companies Act, 2013.
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One of the crucial rights which Companies Act 2013 gave them is the right to remove the Directors of the company if they are not acting in agreement with the company’s constitution, and only utilizing their powers for their benefits.
The Board of directors of the company is the key person who is in charge of running a business operation of the company. However, there are certain situations where the company management decides to remove a director owing to any negligence, breach of privacy or any other term by which a director was supposed to comply with.
As stated by the Companies Act, 2013 director means a director appointed to the Board of a company. In a general sense, it is the natural person who has specific education and experience which adds up to the prosperity of the company.
As per Section 2(34) the CA, 2013 A director means any individual who is elected as the director of the Company by its board to perform certain duties and functions on behalf of the company as per the provisions of the Companies Act, 2013.
Only an individual should be elected as a director of a Company. No association, body corporate, or firm should be appointed as a director of a Company. Section 169 of the CA, 2013 act deals with the removal of Directors.
Section 149 of the Companies Act provide that a public limited company is mandatory to have at least three directors, whereas at least two directors are needed in the situation of a private company and one director is mandatory to be elected in situations of a one Person Company. A maximum of fifteen directors can be selected by a company. However, a company can appoint higher than fifteen directors only after passing a special resolution at its annual general meeting or extraordinary general meeting.
The distinct types of directors have distinct appointment terms like Managing Director and whole-time directors must have a term of five years, Additional Director must have termed up to following General Meeting, Nominee director has a term as mentioned in the service agreement.
Section 169 of the CA, 2013 contends with the removal of a director. The company needs to follow this provision otherwise company and its officer will attract penal provisions as stated by The Companies Act, 2013.
Yes, there is an exception to the removal of the director as stated by company act 2013 i.e., the company should not remove the following mentioned persons from the position of director: –
The procedure for the removal of a director is as follows:
The director is given an opportunity to be heard before its removal.
Only two forms are required for the removal of the Director:
If a company contravenes any provisions mention under the Companies Act, 2013, the company and every officer of the company who is in default should be punishable with a fine which shall not be lesser than 50000 rupees but which may hold up to 500000 rupees
One must comply with the above-disclosed provisions to avoid a penal situation. There need to be distinct reasons regarding why the company management wants the removal of directors but the director must be given the chance of being heard before he or she is removed.
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