The removal of a director must comply with both the Companies Act, 2013 and a company's internal rules. Whether for a private or public company, proper legal procedures are essential to ensure validity.

A special notice under Section 115 must be given by shareholders or the Board at least 14 days before the meeting. The concerned director can also submit a written reply for shareholder consideration.

A Board Resolution is passed, followed by an Ordinary or Special Resolution at an AGM or EGM. Proper filing of Form DIR-12 with the Registrar of Companies (ROC) is mandatory to officially record the change.

Extra steps, such as filling the resulting vacancy, may be outlined in the company's Articles of Association. Disputes, if any, may be taken to the National Company Law Tribunal (NCLT).

Sperso Filings provides end-to-end assistance in managing director removal—right from drafting resolutions to filing necessary forms—ensuring smooth, compliant execution.

Who is a Director Under the Companies Act, 2013?

A director is an individual appointed to manage a company’s affairs and ensure compliance with its MOA, AOA, and legal obligations. As a company operates through its Board, directors play a key role in governance.

Types of Directors:

• Executive Directors: Handle daily operations (e.g., CEO, CFO).
• Non-Executive Directors: Offer strategic oversight, not daily management.
• Independent Directors: Ensure fairness and protect shareholder interests.

As per Section 169, a director can be removed via a formal process involving special notice, a board or shareholder resolution, and an opportunity for the director to present their case.

Role of a Director in a Company

A director plays a vital role in guiding a company’s success, compliance, and governance. Their main responsibilities include:

1. Strategic Planning:
   Setting long-term goals and identifying growth opportunities.
2. Decision Making:
   Making key business and operational decisions with sound judgment.
3. Financial Oversight:
   Ensuring proper management of finances, tax compliance, and budgeting.
4. Risk & Crisis Management:
   Identifying risks, avoiding conflicts of interest, and handling crises to protect the company.
5. Legal Compliance:
   Ensuring adherence to laws, regulations, and the Companies Act, 2013.
6. Stakeholder & Team Engagement:
   Building strong relationships with stakeholders and leading team development.
7. Corporate Governance & Ethics:
   Maintaining transparency, ethical conduct, and corporate best practices.
8. Innovation & Adaptability:
   Driving innovation and adjusting to market or regulatory changes.

Directors also ensure timely filings (like Form DIR-12) and work closely with the Company Secretary to meet all statutory obligations.

Ways to Remove a Director of a Company

A director can be removed by voluntary resignation or compulsory removal under the Companies Act, 2013.

1. Voluntary Resignation

A director may resign by submitting a written notice to the company. The Board accepts this through a resolution, and Form DIR-12 must be filed with the ROC. Resignation takes effect either on the date mentioned or when accepted by the Board.

2. Compulsory Removal

Under Section 169, shareholders can remove a director by passing an ordinary resolution in a General Meeting after giving special notice. The director can present their case before the decision. Disqualification, misconduct, or legal orders may also lead to removal, followed by filing Form DIR-12.

Law Governing Director Removal

A company operates through directors who manage its affairs. The Companies Act, 2013 governs director removal in India. Under Section 169, shareholders can remove a director before their term ends by passing an ordinary resolution at a Board or general meeting. A special notice (14 days in advance) is required, overriding any conflicting terms in service agreements or the Articles of Association.

In cases of mismanagement or public interest violations, Section 241 allows members to approach the NCLT, which can investigate and order actions under Section 242, including the removal of directors or key officers to protect shareholder rights and restore fair management.

Proper compliance with notices, resolutions, and filings (like Form DIR-12) is essential, and companies are advised to seek legal guidance when removing directors.

Checklist for Removal of Director

To legally remove a director under the Companies Act 2013 (and 2006), follow these steps:

1. Issue Special Notice:
   As per Section 115, issue a clear special notice to shareholders and members stating the intent to remove the director.
2. Notice to Director:
   Send the notice to the concerned director at least 14 days before the general meeting, allowing time to respond.
3. Right to Representation:
   Allow the director to submit a written representation, which must be shared with shareholders or read at the meeting.
4. General Meeting & Voting:
   Conduct voting in the general meeting as per Section 169; shareholders decide the outcome through majority votes.
5. File Form DIR-12 with ROC:
   File Form DIR-12 with the Registrar of Companies along with the resolution, special notice, and related documents.
6. Restriction on Reappointment:
   The removed director cannot be reappointed to the same post as per the Companies Act provisions.
7. File Form MGT-14 (If Required):
   If the removal involves amendments to the articles or share capital, submit Form MGT-14 with the ROC.
8. Appoint Replacement (If Needed):
   The board may appoint a new or additional director depending on company rules and agreements.
9. Protect Minority Shareholders:
   Ensure removal does not unfairly harm minority shareholders, considering proportional representation if required.
10. File with Companies House (If Applicable):
    For certain companies, filings like draft minutes and special notices may be required with Companies House.

Procedure for Removal of Director

Compliance with the Companies Act 2013 (Section 169) and filing of Form DIR-12 (for removal) or DIR-11 (for resignation) is mandatory. Below is the simplified procedure:

Step 1: Review Bylaws & Legal Framework

Examine the company’s bylaws, shareholder agreements, and legal documents to confirm the removal process. Consult legal experts to ensure compliance with the Companies Act 2013 and avoid procedural errors.

Step 2: Establish Grounds for Removal

Clearly define and document valid grounds such as misconduct, breach of duty, conflict of interest, or underperformance. Proper documentation reduces the risk of legal disputes.

Step 3: Convene Board Meeting

Hold a formal Board Meeting with proper notice to the concerned director. Allow the director the right to represent their case, as per Secretarial Standards and company bylaws.

Step 4: Voting on Removal

Conduct voting in line with company bylaws and legal provisions. Ensure quorum, special notice, and majority approval to finalize removal and avoid future disputes.

Step 5: File & Communicate the Decision

Record the decision in the meeting minutes, notify the director in writing, and file Form DIR-12 with the Registrar of Companies (ROC). Update company records, restrict access to resources, and deactivate the director’s Digital Signature Certificate (DSC) if applicable.

Steps for Voluntary Resignation of a Director

When a director resigns voluntarily, the company must complete a formal process to remove their name from records. Here’s the procedure:

Step 1: Submission of Resignation

The director submits a formal resignation letter to the Board, stating the intention and effective date of resignation.

Step 2: Schedule Board Meeting

The company issues at least 7 clear days’ notice to all directors to convene a Board Meeting to discuss the resignation.

Step 3: Board Discussion & Resolution

The Board reviews and accepts the resignation through a resolution, appreciates the director’s service, and authorizes officials to handle the formalities. Pending matters may also be discussed.

Step 4: Filing by Director

The resigning director files Form DIR-11 with the ROC, attaching the resignation letter, proof of its delivery, and Board Resolution.

Step 5: Filing by Company

The company files Form DIR-12 with the ROC, attaching the resignation letter and Board Resolution. OPCs must comply with additional requirements, if applicable.

Step 6: Update Records

Upon filing, the Ministry of Corporate Affairs (MCA) updates the company's records, officially removing the director’s name from the register.

Director Remains Absent from Board Meetings for 12 Months

Under Section 167 of the Companies Act 2013, if a director fails to attend all board meetings for 12 consecutive months, their office is automatically vacated. The company must complete certain formalities to confirm this removal. Below is the procedure to ensure compliance:

Step 1: Confirm Absence from Meetings

If a director is absent from every Board Meeting for over 12 months, without or with leave, their office is deemed vacated as per Section 167. This applies regardless of whether they were duly notified of meetings.

Step 2: File Form DIR-12

After the automatic vacancy, the company must file Form DIR-12 with the Registrar of Companies (ROC). This updates the director's status in official records, ensuring the change is legally recognized.

Step 3: Update MCA Records

Once Form DIR-12 is filed, the director’s name is removed from the Ministry of Corporate Affairs (MCA) database. This confirms that the individual no longer holds any position or responsibility in the company.

This statutory process ensures proper corporate governance. Timely filing and accurate documentation of missed meetings are essential to comply with the Companies Act 2013 and avoid disputes.

Suo-moto via the Board

When the Board initiates a director’s removal on its own (suo-moto), the procedure under the Companies Act 2013 is as follows:

1. Issuing Notice:

A seven-day notice is sent to all directors with a special notice regarding the proposed removal, in compliance with the Companies Act 2013.

2. Board Meeting:

At the Board Meeting, a resolution is passed to call an Extraordinary General Meeting (EGM) to seek shareholder approval for the director’s removal.

3. Notice for EGM:

Members receive a minimum 21-day clear notice detailing the EGM’s agenda and including the special notice regarding the removal.

4. Shareholder Vote:

During the EGM, shareholders vote on the resolution. The director concerned must be given a chance to present their case. The resolution passes if the majority approves.

5. Post-Resolution Filings:

Following approval, the company files Forms DIR-11 and DIR-12 with the Registrar of Companies (ROC), attaching the Board and Ordinary Resolutions.

6. Update MCA Database:

Once filings are complete, the director’s name is removed from the Ministry of Corporate Affairs (MCA) database.

Proper documentation, adherence to timelines, and applicable fees (depending on the company’s size) are essential throughout the process.

Removal of Nominee Director

As per Section 115 of the Companies Act 2013, the removal of a nominee director begins with issuing a special notice and holding a general meeting for shareholder approval. After the resolution passes, Forms DIR-11 and DIR-12 must be filed with the ROC, officially removing the director from MCA records.

Step 1:

A Board Meeting is called with seven days' notice to all directors, along with a special notice regarding the proposed removal.

Step 2:

In the Board Meeting, a resolution is passed to convene an Extraordinary General Meeting (EGM) for shareholder approval.

Step 3:

An EGM notice of at least 21 clear days is sent to members. The director is given a chance to present their case. If the majority approves, the resolution passes.

Step 4:

File Forms DIR-11 and DIR-12 with the ROC, along with the necessary resolutions. Once processed, the director’s name is removed from the MCA database.

Removal of Director by Tribunal

Under the Companies Act 2013, the NCLT may remove a director if their actions harm the company or violate legal obligations. The Tribunal ensures directors are accountable, protecting shareholder rights and corporate governance.

Conditions for Tribunal Intervention:

Removal may occur in cases of fraud, mismanagement, oppression of shareholders, breach of fiduciary duty, financial misconduct, or disqualification under Section 164(2) (e.g., failure to file financial statements).

Situations Warranting Action:

Directors misusing their position, committing misconduct, neglecting statutory filings (like tax returns), or breaching regulatory duties may prompt Tribunal involvement.

Application Process:

A petition is filed with the NCLT by shareholders, the RoC, or the company, using prescribed forms and fees. The Tribunal then issues a notice to the director and company.

Legal Proceedings:

Both sides present their case at a Tribunal hearing. After review, the Tribunal may order removal or disqualification. Appeals can be made to the NCLAT if necessary. The process ensures director accountability and upholds governance standards.

Implications of Director Removal

Removing a director has legal and operational effects, potentially impacting leadership, decision-making, and corporate governance.

• Termination of Duties: The removed director ceases all management responsibilities and authority.
• Operational Impact: The director no longer represents or acts on behalf of the company.
• Legal Risks: Improper removal may lead to disputes or claims against the company.
• Reputation: Public knowledge of removal may harm the company’s image, so the process must be handled sensitively and confidentially.

Form DIR-12 for Director Removal

Filing Form DIR-12 under the Companies Act 2013 is mandatory to avoid penalties. It ensures transparency by keeping public records accurate, reflecting good corporate governance, and informing stakeholders like investors and creditors. Proper filing also supports audits, maintains operational continuity, and serves as official documentation for future compliance checks.

Information Required in Form DIR-12

The following details must be included:

• Company Name: Full registered name
• CIN: Corporate Identification Number
• Registered Address: Complete official address
• Director’s Name: Full name being removed
• DIN: Director Identification Number
• Reason for Removal: Brief description (e.g., resignation, disqualification)
• Date of Meeting: When the resolution was passed
• Type of Meeting: Board or General Meeting
• Resolution Type: Ordinary or Special
• Attachments: Certified copy of resolution, meeting notice, director’s consent/resignation letter (if applicable)

This streamlined process ensures compliance, transparency, and smooth governance transitions.

Penalties for Delayed Submission of Form DIR-12

Failure to file Form DIR-12, which is mandatory to notify changes in directors or key managerial personnel, can result in substantial penalties.

For delays in filing, an additional fee is charged depending on the period of delay as follows:

• If the delay is up to 30 days, the additional fee is twice the normal filing fee.
• For delays of more than 30 days but up to 60 days, the fee is four times the normal fee.
• If the delay extends beyond 60 days but up to 90 days, the fee rises to six times the normal fee.
• For delays of more than 90 days but up to 180 days, the fee becomes ten times the normal filing fee.
• If the delay is more than 180 days, the fee reaches twelve times the normal filing fee.

In addition to these late fees, the company and each defaulting officer are liable to pay a penalty of ₹50,000. Furthermore, if the failure continues, there is an additional fine of ₹500 per day, capped at ₹2,00,000 for the company and ₹50,000 for each officer.

It is therefore essential to file Form DIR-12 within the prescribed time to avoid such financial and legal consequences.

When a Director Cannot Be Removed Under Section 169 of the Companies Act

As per Section 169 of the Companies Act, 2013, a director cannot be removed under the following circumstances:

• When appointed by the Tribunal under Section 242.
• If they are an independent director reappointed for a second term under Section 149(10).
• In companies applying Section 163, where two-thirds of directors are elected via proportional representation.

Despite these restrictions, Section 169 permits the removal of other directors before the end of their term if the company:

• Gives the director a fair chance to be heard.
• Passes an ordinary resolution.
• Sends the resolution notice to the concerned director.
• Obtains a special notice for the resolution proposing removal.

Common Issues and Their Resolution

While filing DIR-3 KYC or handling director removal, certain issues may arise. Being aware of these challenges and their solutions ensures smooth compliance and avoids penalties.

1. Delays in Removal Process

Delays often result from incomplete documents, legal disputes, or improper procedures. To prevent this, ensure thorough documentation, meet all legal requirements, and seek expert advice when necessary. Keeping open communication with stakeholders also helps speed up the process.

2. Shareholder Disputes

Conflicts among shareholders may occur due to differing opinions on company direction or profit-sharing. A clear shareholder agreement, transparent communication, and, if needed, mediation or arbitration, can resolve disputes early and maintain company harmony.

3. Documentation Errors

Mistakes or missing details in documents can cause compliance delays. Always review forms carefully, use standard templates, and get professional help if required. Regular checks and audits further ensure document accuracy and completeness.

Why Choose Sperso Filings for Director Termination?

Sperso Filings offers a smooth, legally compliant process for director removal. Our Expert Legal Guidance helps you manage complexities and reduce risks. We provide Comprehensive Documentation Support to ensure accurate preparation and filing of all paperwork. With Efficient Compliance Handling, every legal requirement is promptly met. Our End-to-End Service covers everything from consultation to final removal, offering a hassle-free experience tailored to your business needs.