Resignation And Removal Of Director Under Companies Act 2013 (Section 168 & 169)
Updated: Oct 4, 2022
This section discusses the procedure to be followed for the resignation or removal of directors.
Resignation of Director
1. Any director who wants to resign his office should:
Give a notice to the board and company; which should be forwarded to the registrar in the prescribed manner. This should also be placed in the immediately following general board meeting.
Give notice to the registrar within 30 days with detailed reasons in the prescribed manner.
2. The resignation of the director would begin from the date of receipt or the date mentioned in the notice.
3. The director shall be liable for the offences he committed during his tenure even after his resignation.
4. The promoter or, in his absence, the Central Government has to appoint the required number of directors who shall hold office till the appointment of directors in the general board meeting by the company.
Section 168 of the Companies Act 2013
[Resignation of director]
(1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company:
Provided that a director shall also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed.
(2) The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later:
Provided that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure.
(3) Where all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting.
Removal of the Director
(1) A company can remove a director before the expiry of his term of office after giving him a reasonable chance of being heard by ordinary resolution, but he shouldn’t be the one who was appointed by the Tribunal under section 242. It can’t be applied when the company has availed the option the principle of proportional representation under section 163 to appoint not less than two thirds of the total number of directors.
(2) A special notice at the meeting is required to remove or appoint a director under this section.
(3) The company is supposed to send a copy of receipt of notice of a resolution to remove a director to the director concerned, and the director, irrespective of the fact that he is a member of the company or not, has the right to be heard on the resolution at the meeting.
(4) When the director makes a written representation for the notification of the notice to members of the company, the company shall, if there is enough time,-
(a) state that resolution is made in any notice given to members of the company; and
(b) send a copy of the representation along with the notice of the meeting to every member of the company, before or after the receiving the receipt of the representation by the company, and in case a copy of the representation is not sent as it was received too late or because of the default by company’s, the director should be heard orally without prejudice to his right and require that the representation should be read out at the meeting.
In case a copy of representation is not sent, a copy has to be filed with the Registrar. In case the Tribunal is satisfied on an application either by the company or by any other aggrieved person that the rights conferred by this subsection are being abused by the director, then, the copy of the representation is not be sent and the representation is not be read aloud at the meeting.
(5) The vacancy created by the removing of a director who had been appointed by the company in general meeting or by the Board, be filled by the appointing another director as replacement at the meeting at which he is removed, by providing special notice for the intended appointment has been given under sub-section (2).
(6) The director appointed as replacement should hold office till the date his predecessor would have held office in case he had not been removed.
(7) In case the vacancy is not filled under sub-section (5), it needs to be filled as a casual vacancy according to the provisions of this Act. The director who was removed can’t not be re-appointed as a director by the BoD.
(8) This section doesn’t
(a) deprive a person of any compensation or damages payable to him for the terminating his appointment as director according to the terms of contract or terms of his appointment as director, or of any other appointment related to termination as director; or
(b) derogate any power to remove a director under the other provisions of this Act.
Section 169 of Indian Companies Act 2013
[Removal of directors]
(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 subsection 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.