Removal of Directors

Buy shareholders

A company may by ordinary resolution remove a director (not being a director appointed by the Central Government) before the expiry of his period office by:

1) Special notice of any resolution to remove a director at a meeting at which he is to be removed
2) On receipt of notice of a resolution to remove a director the company shall forth while send a copy thereof to the director concerned. The director shall be entitled to be heard on the resolution at the meeting.

Where notice is given of a resolution to remove a director and the director concerned makes representations in writing to the company and requests the notification of representations to members of the company the company shall:

1) In any notice of the resolution given to members of the company state that facts of the representations and
2) Send a copy of the representations to every member of the company to whom the notice of the meeting is sent. If a copy of the representations is not sent because they were received too late or because of the company’s default the director may require that the representations shall be read out at the meeting.

Copies of the representations need not be sent out and the representatives need not be read out at the meeting:

1) On the applications either of the company or any other person who claims to be aggrieved, the Company Law Board is satisfied that the rights are being abused to secure needless publicity for defamatory matter and
2) The company law board may order the company‘s costs of the applications to be paid in whole or in part by the director.

Exceptions: the following directors however cannot be removed
1) Directors appointed by the central however; cannot be removed;
2) In the case of a private company the director holding office for life as n 01.04.1952;
3) When the director has been appointed by the principles of proportional representation.

A vacancy so created by the removal of a director may, if appointed in general meetings or by the Board be filled by appointment of another director in his place or by the meeting at which he is removed provided special notice of the intended appointment has been given. A director so appointed shall hold the office until the date up to which his predecessor would have held office if he had not been removed as aforesaid if the vacancy is not filled as a casual vacancy. However, a director who was removed from office shall not be re-appointed as a director by the Board of directors.

The person removed from the directorship shall not be deprived of any compensation or damages payable to him in respect of the termination of his appointments as a director.

Nothing shall be taken as derogating from any power to remove a director which may exist under other 1) provisions of the Act. Thus, a director may also be removed by the board if articles so confer powers in the board of directors. A permanent director entitled to hold office for life under the articles of association of a company can be removed from the office under above provisions.

By central Government:

The Central Government under following circumstances may state a case against any person and refer the same to the company law Board with request that the company law Board may inquire into the cases and record a decision as to whether or and such person is a fit and proper person to hold the office of a director connected with the conduct and management of any company:

1) Any person concerned with the conduct and management of the affairs of the company is guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and function:
2) Business of a company is not conducted and managed by such a person in accordance with sound business principles or prudent commercial practices;
3) That company is conducted and managed by such persons in a manner which is likely to cause or has caused serious injury or damage to the interests or business.
4) that the business of a company is conducted and managed by such person with intent to defraud its creditors members or any other person for a fraudulent or unlawful purpose or in a manner prejudicial to public interest.

Source: Business Law