Vacation of Office of Directors

The office of the director shall become vacant if:

1) He fails to obtain within 2 months, or at any time thereafter ceases to hold the share qualification, if any required of him by the articles of the company.
2) He is found to be of unsound mind by a Court of competent jurisdiction;
3) He applies to be adjudicated insolvent ;
4) He is adjudged an insolvent.
5) He is convicted by a Court for any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than 6 months.
6) He fails to pay any call in respect of shares of the company held by him, whether alone or jointly with others within 6 months from the last date fixed for the payment for the call unless the Central Government has, by notification in the Official Gazette removed the disqualification incurred by such failure;
7) He absents himself from 3 consecutive meetings of the Board of directors or from all meetings of the Board for a continuous period of 3 months, which ever is longer without obtaining leave of absence from the Board;
8) He or any firm in which he is a partner or any private company, of which he is director, accepts a loan. Or any guarantee or a loan, from the company without the approval of the Central Government
9) He fails to make disclosures to the Board in respect of contracts in which he is interested;
10) he becomes disqualified by an order of court for being convicted of an offence in respect of the promotion, formation or management of a company, or in the course of winding up he is guilty of fraud or misfeasance;
11) He is removed before the expiry of period of his office;
12) Having been appointed a director by virtue of his holding any office or other employment in the company he ceases to hold such office or other employment in the company
13) He resigns from his office (resignation tendered cannot be withdrawn without the company’s or Board’s consent.

In the absence of any provision either in the companies Act. 1956 or in the memorandum of association or articles of association of the company, regarding resignation by a director, the ordinary rule of common law must be applied and a director who had submitted his resignation would be deemed to have resigned from his office from the date of submission of his resignation when his intention is unequivocally expressed either orally or by a letter.

The disqualification shall not take effect:

1) for 30 days from the date of adjudication sentence or order
2) where any appeal or petition is preferred within 30 days against the adjudication sentence or conviction resulting in the sentence or order, until the expiry of 7 days from the date on which such appeal or petition is disposal of; or
3) Where within 7 days aforesaid any further appeal or petition is preferred in respect of the adjudication sentence, conviction or order resulting in the removal of the disqualification until such further appeal or petition is disposed off.

A private company which is not a subsidiary of a public company may, by its articles provide that the office of director shall be vacated on any grounds in addition to those specified above.

On the happening of any of the above events a director vacates his office automatically. Board has no power to condone the offence. While a private company by its articles may provide additional grounds for disqualification, a public company cannot do so.

If a person functions as a director when he knows that the office of director held by him has become vacant on account of any of the above disqualification he shall be punishable with fine which may extend to Rs 5000 for each day on which he so functions as a director.

Source: Business Law