How do you Remove a Director from a Company?

Posted by Unimarks on November 16th, 2019

The director of a company is a person who has the most power in a company, just a little underpowered than the shareholders. A Director of the company is a person who directs the company towards success and greater things. When things go great the director takes the benefit and when the business dulls the director is the first person to be blamed. It’s a tough job to be in because all greatest heights have the longest falls. But when the director is a non-visionary or a person with less intent to improve your companies yield, then it is advisable to remove the director from the company immediately and this article will tell you how.

A company is empowered to remove its directors before the expiry of their respective term, the powers of which is vested with the shareholders. Non-compliance with any of the stipulated processes can make the decision valid if it is appealed in a court.

Here are the basic steps you must follow to remove the director from a company:
–> Basic Pre-requisite

One of the common requisites in the various laws ordained involves providing the defendant or defaulter (in this instant the Director) with an opportunity of being heard. The process of removal cannot be legally initiated without providing this opportunity to the director who is to be removed. Knowing that removing the director is easily a huge change in command and a full investigation is normally advisable. You may acclaim vital information via this. It is considered to be a process you have to go through before issuing the notice for removing a director from a limited company.  

–> Issue of Notice

This is the first step in the process of removal that must be initiated by issuing a notice. This notice must be processed by the shareholders who are holding a minimum voting power of 1%; or who holds the shares on which an aggregate sum of not more than Rs 5,00,000 which has been paid up to the date of the notice. Such a notice, known as a special notice, must be signed by all the members. The special notice must be delivered to the company at least 14 days before the date of the meeting, at which the resolution will be passed. It could also be delivered earlier but wouldn’t be valid if issued before three months of the date of the meeting.

–> Notice to Members

A copy of this notice must be sent to the director concerned, who in-turn are entitled to be heard on the resolutions made at the meeting, whether or not the director is a member of a company. The notice must be served at least seven days, which is a week before the date of the meeting. Alternatively, if the shareholders are unable to deliver the notice due to any reasonable circumstances, it could be published in two newspapers, one in English and the other in their respective regional language. In addition to this, the notice must also be mandatorily posted on the company’s official website (if it maintains one). Similarly, the notice must be posted on the website at least seven days before the date of the meeting.

–> Representation in Writing

The concerned director can make a representation in writing or softcopy to the company against the notice of removal which has been issued. He/she is also entitled to make a general plea to the company, and the representation must be sent to all the members and shareholders. Also, the members must be notified of the representation through a legal notice.  If the company is unable to send the copies to all the members, the director may request for the representation to be read out at the following meeting. The director is entitled to this right and without prejudice to his other right which is to be heard orally.

–> Appeal to the Tribunal

If the organization or any aggrieved person decides against sending out the representation to all the members or reading it out in a meeting, they could also make an application to the Tribunal, requesting the nullification of this process. The Tribunal is entitled to annul this process, this is done in cases where the board finds that the director is using this right to secure unnecessary publicity for the defamatory matter. Further, the director is also bestowed with the right to issue an order demanding the director to cover the cost of this application borne by the company.

Removing a director from a company has to happen with various legal notices being sent, which would need the help of the legal attorneys. Each form must be cross-checked by an experienced attorney before being sent to the other members, so it is advisable to take experienced legal advice for such matters. The following articles on this topic will give you in-depth information on what forms are to be used.

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Joined: November 6th, 2019
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