removal of directors

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Sandeepkedia (Querist)
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03 August 2007 A managing director neither holding board meeting and nor make compliance to roc when the matter comes with other directors they arrange for board meetings and issue notices and held the same consecutively 5 times , but the same time old md is neither attending the meeting nor respond whether as per section 284 board can remove him if yes then how

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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04 August 2007
A director may be removed or barred from office either by moving a resolution
for this purpose or by defeating the resolution for his appointment. The
proposal to remove a director may emanate from the Board or from the
shareholders.
208.2 Non-applicability
The provisions are not applicable to—
u the nominee director(s) appointed by the Central Government/Financial
Institutions who cannot be removed by the company;
u a director of a private company who has been appointed for life as on 1st
April, 1952 whether or not he is subject to retirement under an age limit
by virtue of the articles or otherwise;
u a director who has been appointed by the company in general meeting
according to the principles of proportional representation.
208.3 Special notice
In case the proposal for removal of director, emanates from the Board, a Board
Resolution (Annex 208.1) should be passed for removal of director and for
convening a general meeting in this regard. In case the removal is sought by the
shareholder(s), a special notice (Annex 208.2) should be given of any resolution
to remove a director. There is no requirement with regard to the number of
members or their shareholding and even one member is entitled to give special
*RELEVANT PROVISIONS :
u Companies Act, 1956 : Sections 190, 284, 318.
u Companies (Central Government’s) General Rules and Forms, 1956.
u Standard Listing Agreement.
APPLICABILITY : ALL COMPANIES.
notice — Karnataka Bank Ltd. v. A.B. Datar [1994] 79 Comp. Cas. 417 (Kar.).
There is no need to give any reason for removal of a direction in the resolution
proposed to be moved — Karnataka Bank Ltd. v. A.B. Datar [1994] 79 Comp. Cas.
417 (Kar.).
208.4 Forwarding copy of notice to the director
A copy of the notice (Annex 208.3) of a resolution to remove a director should
be sent to the concerned director forthwith. The director, whether or not he is
a member of the company, shall be entitled to be heard at the meeting. The
resolution may also be published (Annex 208.4) in the newspaper.
208.5 Circulation of representation made by director
In case the concerned director makes any representation in writing (not
exceeding a reasonable length) and requests the company to notify the same to
the members of the company, the fact of receiving the representation should
be stated in the notice of the meeting and a copy should be circulated to all the
members. If it is received too late for inclusion in the notice or if there is
omission by the company, the representation should be read out at the meeting.
208.5-1 Exemption from circulation
The company or the person who is likely to be affected may make an application
to the Company Law Board1 seeking exemption from circulating or reading out
the representations if the rights are sought to be abused to secure needless
publicity for defamatory matter. The Company Law Board1 may make an order
for exemption from reading out or circulating the same.
208.6 General Meeting Resolution
The General Meeting should accordingly be held and the resolution (Annex
208.5) for removal of a director should be passed. If a special notice is also given
for the appointment of some other person in his place, the same should also be
considered at the meeting.
208.6-1 Filling up of vacancy
A vacancy created by the removal of the director may be filled up by appointing
some other person at the same meeting or by the Board as casual vacancy.
208.6-2 Prohibition for reappointment
A director who is removed from the office should not be reappointed as a
director by the Board.
1. The powers of Company Law Board in this regard shall stand transferred to the Central
Government when Companies (Second Amendment) Act, 2002 is brought into force.
208.7 Payment of compensation
The director is entitled to be paid compensation for termination of his appointment
as director or any appointment terminating with the office of director like
a director manager.
208.8 Filing of Form No. 32 with the Registrar of Companies
Within 30 days of the passing the resolution, a return in Form No. 32 (Annex 2.8)
should be filed, with the Registrar of Companies together with the filing fees,
through MCA portal www.mca.gov.in.
208.9 Entry in registers
Particulars regarding the removal of director should be entered in the Register
of Directors (Annex 203.3) and the Register of Directors’ Shareholdings.
208.10 Prohibition to remove directors of Government Companies
In the case of Government companies, the director(s) cannot be removed by
the company in general meeting. The Government alone is entitled to revoke the
appointment in terms of the articles of association. The Government’s right
under the provisions of the articles of association was not the same thing as
removal of a director by the company under section 284 - Smt. Farrel Futado
v. State of Goa [1994] 80 Comp. Cas. 659 (Bom.).
208.11 Forwarding of Minute to stock exchange
In the case of a listed company, a copy of the proceedings of the general meeting
should be sent to each of the stock exchange(s) in which the securities of the
company are enlisted.
ANNEX 208.1
(Refer Para 208.3)
BOARD RESOLUTION FOR REMOVAL OF DIRECTOR
RESOLVED that, pursuant to section 284 of the Companies Act, 1956, Mr.....director of
the company be and is hereby removed as a director.
RESOLVED FURTHER that an extraordinary General Meeting of the company be held
on.........at........(time) at...........(venue) to secure the consent of members in this regard.
RESOLVED FURTHER that the notice of the General Meeting, as per the draft submitted
to this meeting, be approved and that the same be issued to all eligible members of the
company.
RESOLVED FURTHER that the secretary be and is hereby authorised to comply with all
formalities required for giving effect to this resolution.
ANNEX 208.2
(Refer Para 208.3)
SPECIAL NOTICE FOR REMOVAL OF DIRECTOR
NOTICE BY SHAREHOLDERS TO COMPANY -
MOVING A RESOLUTION FOR REMOVING -
DIRECTOR - SPECIAL NOTICE
To
The Secretary,
............................................... Ltd.,
...............................
Dear Sir,
I hereby give notice, pursuant to section 284 of the Companies Act, 1956, of my intention
to propose the following resolution as ordinary resolution at the ....General Meeting of
the company to be held on..... 20....
[Set out the proposed resolution]
Yours faithfully,
.........................................
Signature of member
ANNEX 208.3
(Refer Para 208.4)
NOTICE TO DIRECTOR FOR HIS REMOVAL
NOTICE BY COMPANY TO DIRECTOR - NOTICE TO DIRECTOR
OF INTENDED RESOLUTION FOR HIS REMOVAL
XYZ LTD.
REGISTERED OFFICE
111, MOUNT ROAD, CHENNAI-600 023
To
............................................
............................................
Dear Sir,
I am directed to forward a copy of a notice received from a shareholder, of a resolution
for your removal from office of director which, as appears from the said notice, is
intended to be moved at the.....meeting being held at....on....., 20...at......AM/PM.
Your attention is drawn to the provisions of sub-section (3) of section 284 which entitle
you to be heard on the resolution at the meeting and to sub-section (4) of the said section
pursuant to which you can make representation in writing to the meeting for notification
to members.
Your presence is solicited.
Agenda for the meeting is enclosed.
Yours faithfully,
for...........................Ltd.,
..........................................
Secretary
Note: It is suggested to obtain acknowledgement receipt of this notice from the Director.
ANNEX 208.4
(Refer Para 208.4)
NOTICE FOR REMOVAL OF DIRECTOR
FOR PUBLICATION IN NEWSPAPER
Following item of business will be included in the notice:
To consider and, if thought fit, to pass the following resolution as an ordinary resolution,
special notice of which having been given pursuant to section 284 of the Companies Act,
1956:
“RESOLVED that Mr......be and is hereby removed from his office as Director of the
company.
RESOLVED FURTHER that Mr.....be and is hereby appointed as Director of the company
in place of Mr.....to hold office during such time as Mr......would have held if he had not
been removed.
Dated......20... By order of the Board,
................................................
Secretary
ANNEX 208.5
(Refer Para 208.6)
GENERAL MEETING RESOLUTION FOR REMOVAL OF A DIRECTOR
AND APPOINTMENT OF ANOTHER DIRECTOR
RESOLVED that Mr.....be and is hereby removed from his office as Director of the
Company.
RESOLVED FURTHER that Mr.....be and is hereby appointed a Director of the Company
in place of Mr.....to hold office during such time as Mr....would have held had he not been
removed.
Explanatory statement
A notice under section 284(2), read with section 190, of the Companies Act, has been
received from a member of the Company proposing to remove Mr....from the office of
Director and to appoint Mr....in his place.
In compliance with sub-section (3) of section 284 of the Act, a copy of the said notice had
been sent to the said Mr......and he had made no representation in this behalf.
A copy of the notice may be inspected at the registered office of the Company during
business hours on any working day.