Director appointment & removal

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 December 2013
Hi,

A private Limited company has only two directors, now the Company wants to remove a Director and it will appoint some other person not now but later period,

Kindly tell me the procedure for
1.the Removal of the Director

2. Provisions with regard to transfer of shares

3. Can a company be continued with only one Director if so for how much time

Thanks in Advance

Ajay Mishra

Ajay Mishra (Expert)
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04 December 2013 Hi

In Case the director of the company is less than two or the no. of director fix for the quorum, then the remaining director (continuing director or directors) may act for the purpose of increasing the no. of directors to that fixed for the quorum or summoning a general meeting of the company, but no for other purpose.

Please read Regulation 75 of Table A of Schedule I of the Companies Act, 1956.

Ajay Mishra

Ajay Mishra (Expert)
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04 December 2013
PROCEDURE FOR TRANSFER OF SHARES OF PRIVATE COMPANY

Generally articles contain the detailed provisions as regards the procedure for transfer of shares. Usually following steps shall be followed by a private company to give effect to the transfer of shares:—
(i) Transferor should give a notice in writing for his intention to transfer his share to the company.
(ii) The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
(iii) Such price is generally determined by the directors or the auditors of the company.
(iv) The company should also intimate to the members, the time limit within which they should communicate their option to purchase shares on transfer.
If none of the members comes forward to purchase shares then the shares can be transferred to an outsider and the company will have no option, other than to accept the transfer.
(V) the transferor will submit the following documents with company:
(a) Original Share certificate
(b) Transfer deed (Form-7B) properly executed with stamp duty of proper amount.
© any other documents relating thereto.

It is to be noted that any transfer of shares to an outsider without complying with the procedure as specified in the articles for effecting transfer of shares will not be operative against the company. Even in the case where the procedure prescribed by the articles was not followed and such failure was not due to any fault on the part of the selling shareholder, the transfer to an outsider was held not to be effective.
Transfer of shares without consent of holder of shares and without prior sanction of board of directors as required under articles of association of a private company concerned could not be held to be valid. [John Tinson Co. (P) Ltd. v Mrs. Surjeet Malhan (1997) 88 Comp Cas 750 (SC)].

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Ajay Mishra

Ajay Mishra (Expert)
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04 December 2013 For Company:

Procedure for Transfer of shares of the Company:

1. After receiving Transfer Deed(Instrument of Transfer), Share Certificate and other documents, if any.
2. Check all documents is proper and eligible to register for transfer.
3. Call Board Meeting
4. At Board Meeting register the Transfer and made entry in the Register of Members and Register of Transfer.
5. Return the Share Certificate after making entry of transfer therein within 2 months.
6. Make entry in the minutes of Board Meeting.
7. The detail of Transfer from last AGM till the date of AGM should be submitted in Annual Return to ROC in Form-20B.

Ajay Mishra

Ajay Mishra (Expert)
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04 December 2013
REMOVAL OF DIRECTORS

The provisions of section 284 relating to the removal of directors are applicable to private and public limited companies.

All directors are subject to removal

If no fixed period has been provided for retirement in articles of association of a private company, a director appointed is entitled to continue till he is removed in accordance with provisions of section 284.
Directors can be removed under section 284 by members in general meeting, whether they are subject to retirement or not in a public company.

Certain director cannot be removed by a company

The following categories of directors can not be removed by a company under section 284 of the Act:—
(a) a director appointed by the Central Government under section 408;
(b) a nominee director of a public financial institution which is by its charter empowered to nominate a person as a director or to remove him notwithstanding any power contained in any other Act;
(c) a director in a private company holding office for life on 1st April 1952;
(d) a director coming within the purview of directors appointed according to the principle of proportional representation under section 265 of the Act.
A person appointed as a life director or permanent director by the Articles or by an agreement is nevertheless removable by the company in general meeting and has no security of tenure in office. While the shareholders have no power, apart from that given in the statute or the Articles, to intervene in the management of the company's affairs, this section is designed to enable them to control the directors by their removal.
A company has power under section 284 to remove a permanent director even if articles of association put restrictions on removal of the permanent director.

Special notice of resolution for removal may be given by a member

It is a significant right vested with every member that a member who is entitled to attend a general meeting and move a resolution may give special notice of a resolution to remove a director at a general meeting or to appoint somebody instead of the director so removed.
A notice of intention to move a resolution for the removal of a director shall be given in writing.

Ajay Mishra

Ajay Mishra (Expert)
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04 December 2013
Specimen of notice to move a resolution for removal of a director
To
The Company Secretary ABC Limited
Dear Sir,

I/We, the undersigned member(s) of ABC Ltd., give notice pursuant to the provisions of section 284(2) read with section 190 of the Companies Act, 1956 that I/we intend to move at the forthcoming annual general meeting/extraordinary general meeting of the Company an ordinary resolution that Mr. XYZ be removed from the office of director of the Company.

Yours faithfully,
Abha Jaiswal