2. A director of a company can be
removed by
1. Shareholders
2. Central Government
3. CLB/Tribunal
3. Removal by shareholder :
Section 284 empowers the company to remove a director by
ordinary resolution before the expiry of his period of office except
in the following cases:
• A director appointed by the central government under section
408.
• A director in case of a private company, holding office for life on
the 1st day of April 1952. (A director for life subsequent to that
day may be removed).
• Director appointed in accordance with the principal of
proportional representation, under section 265. This is to ensure
that the directors appointed by the minority are not removed by a
bare majority.
4. Procedures to be followed for removing director by shareholders:
1. Special notice – For removing a director a special notice should
be obtained from a member proposing an Ordinary Resolution
for removal.
2. Intimate the director – Send the copy of special notice to the
director to be removed.
3. Notices for General Meeting – Notices to be issued for
conducting a General Meeting at least 21 days before the
meeting stating about the special notice and proposing the
Ordinary Resolution for removal.
4. Representations made – If any representation has been made
by the director concerned, it should also be stated in the notice
and the copy of representation to be enclosed. If representation
has not been given to all the members, director can request to
read out such representation in the meeting.
5. 5. Opportunity of being heard – The director also has the right to be
heard at the meeting.
6. Pass resolution – Pass the resolution and remove the director of
the company.
7. Inform the ROC – The Company shall within 30 days from the
removal of a director file Form No.32 and a copy of the resolution
with the Registrar.
8. Penalty – If default is made on complying with the aforesaid
requirements, the company and every officer in default shall be
punishable with a fine of up to Rs. 500 for everyday during which the
default continues.
6. Removal by the Central Government
The companies act enables the central government to remove
managerial personnel (including a director) from office on the
recommendation of the high court. The central government may refer
to the high court cases against managerial person on any of the
ground mentioned in section 388-B. Every such reference will be made
in the form of an application which must contain a statement of
material facts. The person against whom such reference is made must
be joined as a respondent to the application.
7. At the conclusion of hearing of the case, the high court shall
record its decision stating specifically whether or not the
respondent is a fit and proper person to hold the office of
director. If the finding of the high court is against the
respondent the central government shall by order remove
such a person from office.
The person who is so removed cannot hold office of a director
for a term of five years unless the period is remitted. The
person removed cannot claim any compensation for loss or
termination of office.
8. Removal of director by CLB/Tribunal
Regarding oppression and mismanagement under section 397/398
the CLB/Tribunal has the power to reconstitute the Board of a
company by removal of director.
On an application to the court for prevention of oppression and
mismanagement the court may terminate or set aside or modify
any agreement between the company and the managing director,
or any other director or manager. On such termination, the
director cannot serve the company in a managerial capacity for a
period of five years from the date of the order of termination,
without the permission of the court. The director on removal
cannot sue the company for damages or compensation for loss of
office.
