Removal of director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 July 2013 Hello Friends,

What is the procedure for removal of Director who is appointed for life time. i,e the first directors of the company

Be it a Pvt Company or Public Company

Plz reply its very urgent

Ajay Mishra

Ajay Mishra (Expert)
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17 July 2013 Hi

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.

Rajat Poddar

Rajat Poddar (Expert)
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17 July 2013 Procedure for removal of director
1.

A (Special notice) of the intention to move a resolution for the removal of director be furnished by any member to the company not less than 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served and the day of the meeting. (Section 284)

2.

The company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting.

3.

If is not possible for the company to give notice to all the members, publish by advertisement in the newspaper having an appropriate circulation not less than 7 days before the meeting.

4.

The company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The director shall have the right to be heard on the resolution at the meeting.

5.

The director, who is sought to be removed, can make a representation in writing against his removal and request the company to notify it to the company's members [section 225(4)]. If the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must
(a) mention in the notice of the resolution to be moved at the annual general meeting, the fact of the representation having been received; and
(b) send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

If the representation could not be sent to the members because it was received too late or because the company made a default in sending it, the company must read out the representation at the annual general meeting, if the director requires it to do so. In addition, director can make oral representation at the annual general meeting.

6.

Hold and convene a General meeting to discuss besides others the following matters:To pass a [Ordinary resolution] for the removal of director.

7.

In case of listed companies, file a copy of the proceeding of the general meeting in the Stock exchange (s) where the securities of the company are listed.

8.

File [e-form no. 32] with the Registrar of Companies with in 30 days of passing the resolution.

9.

Pay the requisite fees, as prescribed by the Companies (Fees on Application) Rules, 1999.

10.

Fees can be paid through Credit Card / by cash / by cheque in favour of “MCA Collection Account ICICI Bank” at the prescribed rates.

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Rajat Poddar

Rajat Poddar (Expert)
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17 July 2013 Section 284 of the Companies Act, 1956 gives shareholders of every company the right to remove any director from his office, by ordinary resolution, not being a director appointed by the Central Government in pursuance of Section 408 of the Companies Act, 1956, before the expiry of his period of office.

The right given by section 284 is the statutory right which cannot be taken away by the memorandum, articles or by any contract or any other document, and if it is sought to be taken away, such a provision will be void [see section 9]. Section 284 applies to all companies, including private companies. However, removal of a director of a private company which is in the nature of partnership, the removal might be declared as an oppressive act if the shareholders instrumental in the proposing a resolution for the removal are found to have acted in a mala fide manner.

The section applies to all directors except the directors appointed by the Central Government under section 408, and the directors acting as nominees of those financial institutions which are governed by separate statutes of Parliament, and those statutes contain a provision granting immunity to their nominee directors from the removal e.g. Industrial Finance Corporation Act, Industrial Development Bank of India Act, State Financial Corporations Act, Life Insurance Corporation of India Act, etc. This Section applicable to Public as well as Private Company which are subsidiaries of Public Company.

*Special Notice: There are certain resolutions, which can only be moved at a meeting only if its proposers have given a prior notice to the company in this regard. Such resolutions, are deemed as resolutions requiring special notice. The proposers should give prior notice to the company not less than 14 days before the meeting at which it is proposed to be moved.

It means it can not be transacted as an additional item of business.

Any omission to serve a Special Notice on the directors sought to be removed constitutes denial of their statutory right of reply and in the absence of such notice to the directors, any resolution for their removal would be violated by such omission.