Every company is headed by group of people who take important decisions for smooth flow of the business. Directors are solely appointed by shareholders and as per Companies Act 2013, a private company need to have at least 2 directors and a limited company should have at least 3 directors. One of the major roles played by the director is to attend the board meeting and participate in taking decisions. In other words, he/she works as the agent of the company appointed by shareholders, and may also act as the employee.
Some of the general duties of the director are:
• Act within the given Powers
• Promoting the Success of the Company
• Exercising Independent Judgement
• Exercising Skill and Diligence
Company has all the rights to take enforcement action against the director in case of breach of duty. The company also has the right to change or remove the director and replace with the new one.
Process to change the director:
The director can be changed or removed for number of reasons but the resignation should be under the terms of Companies Act 1956, Articles of Association and Service Agreement.
Under Articles of Association: There are number of provisions set in the Articles of Association for the change of director. Below are the few:
• Bankruptcy order is made against the director
• Director is deemed physically incapable of handling the company work due to certain reason.
• Failing to maintain accounts
• Failing to deliver proper tax returns
• Failing to co-operate with fellow shareholders and other company members
Some more highlights on changing director:
• To appoint a new director, firstly the company has to file e-form 32 from the outgoing director.
• Special notice will be filed to remove or appointment of new director under sec 115 of Companies Act, 2013
• A receipt and the copy of resolution to remove the director shall immediately be sent to the concerned director.
• The director can request for reasonable opportunity to be heard in the special notice meeting.
• The notice shall be published 7 days before the meeting in newspaper in respect the language of the paper
• The outgoing director can make representation in writing against the removal and request to notify it to the company’s members under Sec 169. The same copy shall be sent to every member of the company.
• Director Identification Number (DIN) should be allotted by Ministry of Corporate Affairs to the proposed director.
If the director of the company is removed or changed, there will be no effect on the position. Companies set certain clauses for the removal or change of director position. However, company should go according to the companies act set. In some cases, the director may be removed or changed on the grounds for the petition under Companies Act 2013, where court may direct shareholders to buy shares of the director.
Author name – SHEELA JOBY
Senior editor Higrit.com, you could reach her at firstname.lastname@example.org
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