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Resignation of a Director from the Board of Directors of a Company with resigning Directors’ consent.
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Basic
Resignation of a Director in a Company
A Director in a company may want to resign or the Board of Directors may want to remove the Director for several reasons. The Director of a company can also resign from the Board by filing a resignation letter with the company and also intimating the ROC with the same. Here, we will take a look at the procedure that a director needs to follow in case he wants to resign from the post of Director.
Director’s notice of resignation to the company
After giving notice in writing to the Company a Director may resign from a company. The Board is required to intimate the ROC of this notice within 30 days in the form of DIR-12. If the Director chooses, he can also send a copy of the resignation letter to the ROC along with the reasons for the resignation using Form DIR-11. Here is the format for the resignation letter of a Director:
Director’s Resignation Letter Format
Date, Month, Year
To,
The Chairman / Secretary
Company Name Private Limited
City, State, Pin Code
Subject: Resignation from the Office of Director of the Company
Dear Sir/Madam,
I hereby tender my resignation from the office of the Director of the ————– (Company name) with immediate effect or mention the resignation date. Notice of my resignation letter should be submitted to the Registrar of Companies and the Board of Directors should be informed in the next board meeting as conducted.
I sincerely thank all the Board of Directors for giving me this opportunity and timely assistance to discharge my duties during my tenure as a Director of the company.
I request the Board of Directors to please provide me with an acknowledgment of the resignation and a copy of the E-form DIR-12 filed with the Registrar of Companies to that effect for my reference and record.
Thanking You,
Your’s Faithful,
Name of the Director.
Obligation on the part of the Director who is resigning from the post
- A director can resign from his office by submitting a notice in writing to the Board of Directors of the company. An email or a letter to the company is also a valid mode of communication.
- A copy of the resignation can also be forwarded along with the detailed reason for the resignation to the Registrar of Companies in Form DIR11 with the prescribed fees in the Companies Rules 2014 within 30 days from the date of resignation.
*Effective date of resignation:It shall be in effect from the date on which the company has received the notice of resignation or the date the director has specified any. The effective date of resignation shall be the same as the date of cessation that is entered in the form DIR12. - With DIR-11 the Director is also required to attach the following documents:
- Notice of the resignation that is filed with the Company (resignation letter can also be attached)
- Proof of Dispatch of the letter.
- If any acknowledgment that is received from the Company and is mandatory is the Director has selected Yes in Form DIR11.
- Other information can also be provided as optional attachments.
Obligations for the Company
- The Board of Directors shall take considers the notice of resignation that is received and accordingly the resolution should be passed by the Board of Directors for accepting the resignation and it is necessary to draft the minutes of the meeting of the Board of Directors.
- The Registrar should be intimated in Form DIR12 (According to Rule 15 of the companies 2014) the Board of Directors should be intimated within 30 days from the date the resignation is received.
- The board of directors should mention the resignation in the Director’s report of the annual general meeting and it should also be reflected on the website of the Company.
- The company is required to attach these documents while filing DIR1:
- The notice of resignation (Mandatory)
- Evidence of cessation (The board resolution or the acceptance letter can be attached)
Resignation Acceptance Letter by the company
Date, Month, Year
To
——— (Name of the Director who has resigned)
Address.
Subject: Acknowledgement of Resignation
Dear Sir,
With reference to your resignation letter dated ————-. In this regard, the Board of Directors has approved your resignation w.e.f. ———–, in the Board meeting held on —————.
The Board of Directors has sincerely appreciated your association with the company and the support you offered during your tenure. We wish you all the best in your future endeavors.
Thanking you,
Yours Faithful,
For ——— Company,
Director.
Liability of Director after the resignation
Once the Director has resigned and the Board has accepted his resignation, the Director is not liable for any liabilities that are incurred by the company after the date of acceptance of the resignation.
However, a Director is still liable for any offenses that have occurred during his or her as the director of the Company.
Process for Removing a Director
A Company can remove its directors before the expiry of its term, these powers are vested with the shareholders. Here we will talk about the process of removing the Directors of a Company. In case of Non-compliance with any one of these processes can make the decision void, if appealed in a court.
Basic Prerequisite
This process of removing the Director cannot be initiated without providing an opportunity to the Director who is to be removed. This is one of the basic requisites on the laws ordained which provides the defendant or the defaulter an opportunity of being heard.
Issuing Notice
This process of removing Directors must be initiated by a notice. This notice should be processed by the shareholders that have a minimum voting power of 1% or someone who holds shares on which an aggregate sum of not more than Rs. 5,00,000 is paid upon the date of the notice. This is a special notice that should be signed by all the members. This special note should be delivered to the Company at least 14 days before the meeting is held at which resolution will be passed. The notice won’t be valid if isn’t issued before three months of the date of the meeting.
Notice to Members
The Director must be sent a copy of the Notice, who will be heard on the resolution at the meeting, whether the director is a member or not a member of the Company. The notice should be served at least seven days which is a week before the date of the meeting which is held.
If the shareholders are not able to deliver the notice it can be published in any two newspapers, one in English and one in the vernacular newspaper. The notice must be mandatorily posted on the company’s website again this should be done seven days before the date of the meeting.
Representation in writing
The concerned director can make a representation against this removal notice. The director can request the company to send the representation to all the members. Also, the members should be notified of the representation by a notice. In case the company is not able to all the members the director may request for reading of this representation.
Appeal to the Tribunal
An application can be made to the tribunal if the organization or any aggrieved person decides against sending out the representation to the members or reading it out in the meeting, to request to nullify the process. The tribunal can also annul the process if it finds that the Director uses this right for unnecessary publicity for defaming purposes. This director is also given the right to issue an order demanding the director to cover the cost of the application borne by the company.
Remove Director FAQ’s
What prompts the removal of a director in a company?
Directors may be removed by shareholders for reasons such as inadequate performance, breach of duties, or other concerns that impact the company negatively. Alternatively, directors may choose to resign due to personal reasons or conflicts within the company.
What governs the director removal process?
The Companies Act 2013, especially Section 169, outlines the legal framework for director removal.
Can a director be removed for not attending meetings?
Yes, absence from board meetings for 12 months can trigger removal under Section 167.
What is the role of shareholders in director removal?
Shareholders can vote to remove a director, except in cases where the director was appointed by the government or tribunal.
What are the steps for voluntary director resignation?
The director submits a resignation notice, the board acknowledges it, and Form DIR-12 is filed with the ROC.
What is an Ordinary Resolution in the context of director removal?
An Ordinary Resolution is a shareholder vote required for removing a director, unless the company’s articles state otherwise.
What is the significance of Form DIR-12?
Form DIR-12 is essential as it is the official document that needs to be filed with the ROC to record the change in directorship, whether due to resignation or removal, ensuring that the company’s public records are up-to-date.
Are there penalties for late filing of Form DIR-12?
Yes, penalties escalate with the delay, ranging from double to twelve times the government fees.
How does director removal affect the company?
It can impact management, authority, legal standing, and the company’s reputation.
What is the importance of a Board Meeting in director removal?
A Board Meeting is called to discuss and initiate the removal process, including passing relevant resolutions.
