Remove Director

Under the Companies Act 2013, a private limited company must appoint at least two directors to begin its operations. However, there are specific scenarios where a director may be removed from their position.

Shareholders have the power to remove a director during a General Meeting, except in cases where directors are appointed by the government. Directors can be removed for various reasons, including:

• Disqualification: If a director fails to meet the criteria outlined in the Companies Act.
• Attendance Issues: Missing board meetings for over a year.
• Regulatory Violations: Breaching Section 184 of the Companies Act by engaging in forbidden transactions.
• Legal Restrictions: Being barred from participation due to a court or tribunal order.
• Criminal Conviction: Receiving a court sentence of six months or more for a criminal offense.
• Non-Compliance: Failing to adhere to the regulations of the Companies Act, 2013.
• Voluntary Resignation: Choosing to step down from the board willingly.

To effectively and legally remove a director from a company, follow these essential steps:

1. Issuance of Special Notice
   As per Section 115 of the Companies Act 2013, a special notice must be issued to commence the removal process.
2. Notice Period
   The director in question must receive this special notice at least 14 days before the resolution vote. This period allows them sufficient time to prepare their response.
3. Opportunity to be Heard
   The director must be given a chance to present their case. They should be allowed to submit a written representation, which can be shared with members or read at the meeting.
4. Restriction on Reappointment
   After removal, the director cannot be reappointed to the board.
5. Filing Form DIR-12
   Complete and file Form DIR-12, as required by the Companies Act 2013, to officially document the director’s removal. This form is a crucial part of the formal process.

Removing a director from a company involves a series of steps to ensure compliance and accuracy. Here’s a streamlined guide to the process:

Director’s Voluntary Resignation

Essential Obligations:

• A director’s resignation is effective on the date the company receives the notice or a later date specified by the director.
• Even after resigning, the director remains accountable for any infractions committed during their term.

Procedure:

1. Submit Resignation: The director submits a written resignation to the company.
2. Board Acknowledgment: The Board of Directors must formally acknowledge the resignation.
3. Registrar Notification: Notify the Registrar of Companies (ROC) and include the resignation in the directors' report at the next General Meeting as per Section 168 of the Companies Act, 2013.

Detailed Steps:

1. Schedule a Board Meeting: Arrange a meeting according to Section 173 and Secretarial Standard-1 (SS-1).
2. Notify Directors: Send out a meeting notice to all directors at least 7 days in advance.
3. Prepare Documents: Include the agenda, explanatory notes, and draft resolution with the meeting notice.
4. Conduct Meeting: Acknowledge the resignation during the meeting.
5. File with ROC: Submit Form DIR-12 to the ROC within 30 days, including:
   • Certified copy of the Board Resolution
   • Resignation notice
   • Proof of the director's cessation from the board
6. Director’s Form DIR-11: The resigning director should file Form DIR-11 with the ROC within 30 days, including:
   • Resignation notice
   • Evidence of notice dispatch
   • Company’s acknowledgment of receipt
7. Update Register: Revise the Register of Directors and Key Managerial Personnel to reflect the resignation.

Director Absence from Board Meetings

If a director misses board meetings for 12 months without requesting a leave, they are considered to have vacated their position under Section 167. Here’s the procedure:

1. Acknowledge Vacancy: Recognize the position as vacated.
2. File Form DIR-12: Notify the ROC by filing Form DIR-12.
3. Update MCA Database: Ensure the director’s name is removed from the Ministry of Corporate Affairs (MCA) database.

Removal by Shareholders

To remove a director through a shareholder resolution, follow these steps:

1. Schedule Board Meeting: Provide a minimum of 7 days’ notice for the meeting.
2. EGM Resolution: Pass a resolution to hold an Extraordinary General Meeting (EGM) and propose the director’s removal.
3. Issue EGM Notice: Send notices for the EGM to all shareholders, giving a 21-day notice period.
4. Conduct Voting: Present and vote on the removal resolution at the EGM.
5. Director’s Right to be Heard: Allow the director to present their case before voting.
6. File Forms DIR-11 and DIR-12: Submit Forms DIR-11 (if applicable) and DIR-12 to the ROC, including the resolutions passed.
7. Update MCA: Ensure the director’s details are removed from the MCA database after submission.

If your company misses the 30-day deadline to file Form DIR-12 after a director’s resignation, you could face escalating penalties:

• 30 to 60 Days Late: The penalty is double the standard government fee.
• 60 to 90 Days Late: The penalty increases to four times the standard fee.
• More than 90 Days Late: You’ll incur a substantial penalty of ten times the standard fee.
• Over 180 Days Late: The penalty reaches twelve times the standard fee, and additional legal actions for non-compliance may be pursued.

To avoid these penalties and stay compliant with regulations, make sure to file Form DIR-12 within the designated timeframe.

Impact and Considerations of Director Removal

Removing a director from your company can have several implications:

• Termination of Responsibilities: The director will immediately cease all management and decision-making roles.
• Loss of Authority: The director loses their power to act on behalf of the company or represent its interests.
• Legal Risks: Not following proper legal procedures during the removal process could lead to legal disputes and claims against the company.
• Reputation Effects: Director removal might negatively impact your company’s public image, especially if the circumstances are publicly disclosed. Handling the process carefully and discreetly is essential.

Updating Records Post-Director Resignation

After a director resigns, your company may need to update official records through various acts, including:

• Goods and Services Tax Act
• Shops and Establishments Act
• Factories Act
• Foreign Exchange Management Act
• Inter-State Migrant Workmen Act
• Private Security Agencies Act
• Employee Provident Fund (EPF)
• Employee's State Insurance (ESI)
• Other relevant labor laws
• Industry-specific regulations

Ensuring these updates are made helps maintain compliance with regulatory standards and accurately reflects your company’s governance structure.

• For Accounts Subject to Audit: The deadline is October 31st of the assessment year.
• When Reporting with Form No. 3CEB: The due date is November 30th of the assessment year.
• For Non-Audited Accounts: The deadline is July 31st of the assessment year.

How to Complete the ITR 6 Form

To ensure a smooth and accurate filing process for the ITR-6 Form, follow these recommended steps provided by the Income Tax Department:

1. Part A
2. Schedules
3. Part B
4. Verification

Adhering to this sequence helps organize your information and simplifies the completion of your income tax return.

No Documents Required

When filing the ITR-6 form, you do not need to attach any documents, such as TDS certificates. However, it is important to reconcile the taxes deducted, collected, or paid on your behalf by comparing them with your Tax Credit Statement Form 26AS.