The Section 169 of the Companies Act, 2013 (erstwhile section 284 of the Companies Act, 1956) deals with the removal of Directors. As per Section 169 of the Companies Act, 2013, right of the shareholder to remove 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.
The Section 169 of the Companies Act, 2013 read as under: -
(1) A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard.
Provided that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two thirds of the total number of directors according to the principle of proportional representation.
(2) A special notice shall be required of any resolution, to remove a director under this section, or to appoint somebody in place of a director so removed, at the meeting at which he is removed.
(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.
(4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so,—
(a) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and
(b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company), and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting:
Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
(5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under sub-section (2).
(6) A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed.
(7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions of this Act:
Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors.
(8) Nothing in this section shall be taken—
(a) as depriving a person removed under this section of any compensation or damages payable to him in respect of the termination of his appointment as director as per the terms of contract or terms of his appointment as director, or of any other appointment terminating with that as director; or
(b) as derogating from any power to remove a director under other provisions of this Act.
Points to remember: -
- Any one member irrespective for his/her shareholding can give notice for removal of Director pursuant to Section 169 of the Companies Act, 2013.
- The concerned Director can make representation in writing against the resolution proposed for his/her removal, whether or not he is member of the Company.
- Reasonable opportunity of being heard has to be given to the concerned Director.
Procedure for removal of Director is a summarized as under: -
1. Any one member irrespective for his/her shareholding can give notice for removal of Director pursuant to Section 169 of the Companies Act, 2013.
2. After receiving Special Notice from the member to remove Director, it is duty of the Company to give immediate information of the same to the concerned Director and notice of the resolution to its members.
3. If is not possible for the Company to give notice to all the members, company should publish the same notice advertisement in the newspaper having an appropriate circulation before the meeting.
4. Due intimation must be given to the director regarding the removal notice. Right of such director to be heard on the resolution should be taken care of.
5. As per Section 169(4), director also possess the right to make a representation in writing against his removal and request the Company to notify it to the Company's members.
6. If the representation could not be sent to the members because it was received too late or because of company’s default in sending it, the Company must read out the representation at the general meeting.
7. Now it is duty of the Company to hold a General Meeting to discuss the matters and pass a ordinary resolution to remove the director.
8. File Form DIR 12 with the ROC within 30 days of passing the resolution.
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