Sec 169 of the Companies Act, 2013: Forced removal of Director by the Company
Updated: Oct 4, 2022
The removal of Directors is governed by Section 169 of the Companies Act of 2013 (previously Section 284 of the Companies Act of 1956). A shareholder has the legal right to remove a director at a general meeting using an Ordinary Resolution, as stated in Section 169 of the 2013 Companies Act. This right cannot be restricted by any clause in the MOA/AOA or any other document or agreement.
According to section 169:
After providing him with a reasonable opportunity to be heard, a company may remove a director who is not a director appointed by the Tribunal under Section 242 before the end of his term of office.
At the meeting where the director is removed, there must be special notice of any resolution to remove the director in accordance with this section or to appoint a new director.
The company is required to send a copy of the notice of resolution to remove a director under this section to that director right away. The director has the right to speak during the meeting, whether or not he is a company member.
When a director requests notification to the company's members following notice of a resolution to remove the director under this section, the company shall, if time permits, notify the members of the company by: (a) Mentioning the fact that the request was made in any notice of the resolution sent to company members; (b)send a copy of the representation to every company member who receives notice of the meeting (whether before or after receipt of the representation by the company). The director may demand that the representation be read aloud at the meeting if a copy of it is not sent as directed due to a lack of time or a company default.
If a special notice has been given, the board or the company may fill the vacancy caused by the removal of a director during the general meeting. The newly appointed director will serve until the date that the predecessor would have been in office if he hadn't been fired.
Applicability: This section applies to all types of directors with the exception of those chosen by a tribunal or companies whose bylaws stipulate that at least two-thirds of the total number of directors must be appointed in accordance with section 163's proportional representation rules.
In simpler terms, after convening a board meeting of directors to pass a resolution for director removal, the company calls an extraordinary general meeting and sends a special notice to the members of the company at least 14 days before the date of the meeting, in which they specify their intention for director removal. Any member, regardless of shareholding, may provide notice for the removal of a director under Section 169 of the 2013 Companies Act. The concerned director may submit a written objection to the proposed removal resolution whether or not he is a member of the company.