Removing a director from a company is not as straightforward as sending a notice or striking a name off the register. It involves legal procedures, regulatory filings, and board-level decisions that must align with the Companies Act, 2013. Whether the exit stems from a dispute, strategic restructuring, or a governance concern, knowing how to remove a director from a company can protect the business from unnecessary legal exposure.
In India, the process varies depending on the circumstances. A director may step down voluntarily through resignation, or the shareholders may initiate removal through a formal resolution. Each route has its own set of compliance requirements, timelines, and documentation. This guide walks you through every scenario, from voluntary resignation to forced removal, and explains the regulatory filings that follow.
When and Why Companies Remove Directors
Companies don't remove directors without reason. The decision typically arises from specific operational, strategic, or governance-related circumstances. Understanding the grounds for removal helps the board act with clarity and legal backing.
One of the most common triggers is a breach of fiduciary duty. If a director acts against the company's interest, misuses their position, or engages in fraud, the board has strong grounds for removal. Similarly, prolonged inactivity or failure to attend board meetings for 12 consecutive months can trigger automatic vacation of office under Section 167 of the Companies Act.
Strategic shifts also play a role. During mergers, acquisitions, or investor-led restructuring, the incoming stakeholders may want to reconstitute the board. Disputes between promoters and investors, disagreements over business direction, or loss of confidence in a director's leadership are equally valid reasons.
Whatever the cause, the company must follow the prescribed legal procedure. Skipping steps or acting without proper documentation can expose the company to litigation and regulatory penalties.
Legal Framework: Section 169 of the Companies Act, 2013
Section 169 of the Companies Act, 2013 gives shareholders the power to remove a director from a company before the expiry of their term. This provision applies regardless of any agreement between the company and the director, or anything contained in the articles of association.
However, not every director can be removed through this section. Directors appointed by the National Company Law Tribunal (NCLT) or those appointed under proportional representation are exempt from removal under Section 169. For all other directors, the process requires an ordinary resolution passed at a general meeting.
The concerned director also has the right to be heard. They must receive a special notice of at least 14 days before the resolution is moved, and they can submit written representations to be circulated among shareholders. This safeguard ensures the removal process remains fair and legally defensible.
Step-by-Step Process to Remove a Director from a Company
The process of removing a director from a company involves multiple stages. Each step carries legal significance, and missing even one can invalidate the entire action.
Step 1: Identify Legitimate Grounds
Before initiating the removal, the board must clearly establish the reason. This could be misconduct, statutory disqualification, persistent absence, or a governance conflict. Documenting these grounds is essential for legal defensibility.
Step 2: Convene a Board Meeting
The board of directors holds a meeting to deliberate on the proposed removal. If a majority agrees, the board passes a resolution authorizing the calling of a general meeting to vote on the matter. The appointment of director process follows a similar governance structure, ensuring compliance at every stage.
Step 3: Issue a Special Notice
Under Section 169, a special notice of the resolution must be given to the company at least 14 days before the general meeting. The company then sends this notice to all members and to the director proposed to be removed.
Step 4: Provide the Director an Opportunity to Be Heard
The director has the right to make written representations against the proposed removal. If they request, these representations must be sent to every member who has received the notice of the meeting. The director may also speak at the general meeting before the vote.
Step 5: Pass the Ordinary Resolution
At the general meeting, the shareholders vote on the resolution. A simple majority (more than 50% of votes cast) is sufficient to remove the director. The resolution takes effect immediately upon being passed.
Step 6: File DIR-12 with the Registrar of Companies
After the resolution is passed, the company must file Form DIR-12 with the ROC within 30 days. This form notifies the Registrar about the change in directorship. The filing must be accompanied by the board resolution, the special notice, and the ordinary resolution passed at the general meeting.
Step 7: Update Statutory Records
The company updates its Register of Directors and Key Managerial Personnel to reflect the change. All internal records, including the company's MCA profile, bank mandates, and other authorizations, must also be revised.
Director Resignation vs. Removal: Key Differences
Resignation and removal are two distinct pathways through which a director exits the board. While both lead to the same outcome, the legal process, documentation, and implications differ significantly.
| Parameter | Details |
| Resignation | Voluntary. Initiated by the director through a formal resignation letter addressed to the board. |
| Removal | Involuntary. Initiated by the shareholders through an ordinary resolution under Section 169. |
| Board Resolution | Required in both cases to formally acknowledge the exit. |
| DIR-12 Filing | Mandatory within 30 days for both resignation and removal. |
| Right to Be Heard | Applicable only in removal cases. The director gets an opportunity to present their defence. |
| Effective Date | Resignation takes effect from the date accepted by the board or as stated in the letter. Removal takes effect immediately upon passing the resolution. |
If you are managing a director resignation, the process involves submitting a resignation letter, holding a board meeting, and filing DIR-12 with the ROC. This is typically smoother and less contentious than a formal removal.
DIR-12 Filing: Documentation and Compliance
Form DIR-12 is the official notification to the Registrar of Companies about any change in the company's directorship. Whether a director resigns, is removed, or is newly appointed, this form must be filed within 30 days of the event.
Documents Required for DIR-12 Filing
Late filing of DIR-12 attracts additional fees and penalties from the MCA. Companies that repeatedly miss filing deadlines may also face scrutiny from the ROC, which can lead to compliance notices and further complications.
Automatic Vacation of Office Under Section 167
Not every directorial exit requires a formal removal process. Under Section 167 of the Companies Act, a director's office is automatically vacated in certain situations. These include being declared insolvent, being convicted of an offence involving imprisonment of six months or more, failing to attend board meetings for 12 consecutive months, or being disqualified under Section 164.
In such cases, the company does not need to pass a resolution for removal. However, the company must still file Form DIR-12 with the ROC to update the records and maintain compliance. Keeping track of these triggers is critical for companies with large boards or multiple group entities.
Challenges and Legal Risks in Director Removal
Removing a director is rarely without complications. If proper procedures are not followed, the removed director may challenge the action before the NCLT. Procedural lapses, such as failing to issue the special notice or denying the director's right to be heard, can render the removal void.
In closely held companies, director removal often intersects with shareholder disputes. Minority shareholders may resist the removal, or the director in question may also be a significant shareholder, making the situation more complex. In such cases, legal counsel should be involved early to navigate the governance and compliance requirements.
Companies also need to consider the contractual implications. If the director has an employment or service agreement, premature termination could trigger compensation claims. Reviewing all contractual obligations before initiating removal is a prudent step.
Post-Removal Compliance Checklist
Once the director has been removed, the company must complete several compliance actions to close the loop properly.
For businesses that need support with ROC filing and compliance, working with a professional firm ensures accuracy and avoids regulatory penalties.
Conclusion
Knowing how to remove a director from a company is an essential part of corporate governance. Whether it happens through voluntary resignation or shareholder-driven removal, the process demands strict compliance with the Companies Act, 2013. Every step, from issuing the special notice to filing DIR-12, carries legal weight.
Companies dealing with board restructuring, internal disputes, or strategic leadership changes should approach director removal with professional guidance. Missteps in the process can lead to litigation, regulatory action, and reputational harm. If your company needs assistance with director removal, company registration, or any related compliance services, consult a qualified CA or CS to ensure every filing is accurate and timely.
