• Removal of directors from Board

1.	Mr. A, his son,wife & daughter B,C & D respectively are the director's of Pvt. Ltd. Co. 
2.	A , B & C donot have any shareholding in the company. D(Daughter) owns 500 shares in the Company (which Is around 1 % of the paid up share capital of the company).
3.	Initially they were appointed with the belief that they would carry out business effectively but now it has come to notice of the share holders that they are benefitting themselves and divulging funds
4.	 What is procedure to remove the directors from the board and appoint directors amongst the other shareholders or shareholder's representative to the board at the earliest. Is it advisable to approach the NCLT ?
Asked 1 month ago in Business Law from Ludhiana, Punjab
A Special notice (as per section 115 of the Act) of the intention to move a resolution for the removal of director be furnished by No. of members to the company at least 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served and the day of the meeting. (Section 169)
2.	The company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting.
 
 
* No need to give reasons in explanatory statement as per section 102 of the Act.
3.	The company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The director shall have the right to be heard on the resolution at the meeting.
5.	The director, who is sought to be removed, can make a representation in writing against his removal and request the company to notify it to the company’s members 	. If the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must Mention in the notice of the resolution to be moved at the annual general meeting, the fact of the representation having been received; and

Send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

Hold and convene a General meeting to discuss besides others the following matters: To pass a [Ordinary resolution] for the removal of director.
Ajay Sethi
Advocate, Mumbai
23211 Answers
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Hi 
The query pertains to Section 169 (2) of companies Act 2013 ( Removal of directors ) 

1) You should write to the Company and call for an Extra ordinary general meeting under Section 100 of Companies Act.

2) You should also issue a special notice as per provisions stipulated in Section 115 of companies act  and in Rule 23 of Companies(Management and Administration Rules)2014.

a) Only shareholder/s holding not less than 1% of total voting power or holding shares on which an aggregate sum of not less than Rs. 5,00,000 has been paid up as on the date of notice, can send special notice to the Company for removal of director. 

b) For the purpose of removal of a director  and 

c)  Also to appoint another director in place of a director so removed, at the same extra ordinary general meeting.

(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
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)

(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.

(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.

7) Leading Case Laws:
a) KHETAN INDUSTRIES PRIVATE LIMITED VS. MANJU RAVINDRA PRASAD KHETAN
b) LIC of India v Escorts Ltd.


8) Approaching the NCLT:  You can approach the NCLT only after issuing notices under section 115 of Companies Act and if you are aggrieved by the conduct of the proceedings during the aforesaid EGM. 

Hope this helps
Rajgopalan Sripathi
Advocate, Hyderabad
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43 Consultations
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1. The procedure to remove the director is laid down in the Companies Act. He can be removed from his office by passing an ordinary resolution. Special notice has to be issued on the members for a resolution requiring the removal of a Director or to appoint another Director in his place at the same meeting in which he is to be removed.
 
2. A copy of the special notice as above should also be forwarded to the Director(s) intended to be removed.
 
3. Without prejudice to the right of a Director to be heard at the meeting on receipt of such special notice the Director may make a representation in writing of reasonable length in his defense to the Company on receipt of the special notice which in case if its not too delayed, a reference in the special notice that a representation in the regard is received by the Director has to be made and a copy of the same is to be forwarded to the members and in case the representation has not been so forwarded then the Director may cause the representation to be read out at the meeting.
 
4. The vacancy of the Director if he has been appointed at a general meeting may be filled at the same meeting by appointing another Director in his place by the members and a reference of such an intended appointment has to be made in the special notice.
 
Ashish Davessar
Advocate, Jaipur
18102 Answers
448 Consultations
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Power to remove the directors are bestowed on shareholders under the provisions of Company's act, 2013.

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:

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.

The director who was removed from office shall not be re-appointed as a director by the Board of Directors

The meaning and significance of the right of making representation against removal by the director concerned  was explained in detail by the Bombay High Court in Escorts Ltd. v. Union of India.[16] The Court said that when  a meeting is requisitioned by some shareholders for the purpose of removing a director, the requisitionists must  disclose the grounds on which they want to proceed against the director. This is necessary because the  company has to inform the director beforehand of the resolution to remove him so as to enable him to exercise  his statutory right of making a representation to the shareholders about the matter.  

The power of removal of directors by the shareholders of the company under section 284  is the most common method by which removal of directors takes place in companies.
T Kalaiselvan
Advocate, Vellore
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127 Consultations
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