Company Directors
Table of Contents
The Companies Act, 2013 treats a company as an individual person. However, to manage a company in reality, some real people are required. An appointed director is a person who has been appointed to manage a company’s affairs. The guidelines for the appointment of a director are usually prescribed in the Articles of Association (AoA) of the company. However, shareholders are also entitled to a certain amount of power when it comes to director appointments.
An organization’s board of directors
Directors form the ‘Board of Directors (BoD)’ of a business and are responsible for decision-making and safeguarding all stakeholders’ rights and interests.
A director is removed from the office
It is up to the Board of Directors to remove any director from the company. The delicate process of removing a director from his office must be properly documented in the company’s laws. Nevertheless, certain rules and guidelines have been outlined in the Company Act, 2013.
Removal of a director: Common Causes
From time to time, the board of directors may have disagreements with specific directors. In addition, removing a director should be a carefully considered and well-discussed decision.
There are a number of reasons why the board could remove the director:
- Attendance at meetings of boards and committees is frequent
- Micromanaging, or other problems with the CEO, or other executives
- Competitors of the corporation should be involved
- Taking on a board position with another organization in violation of the organization’s policies.
- Violation of the code of ethics of the organization or any other documented agreements between the company and its directors.
- Engaging in illegal activities regarding the company’s securities
- Information about the company that is sensitive and confidential is revealed to unauthorised individuals.
- Behavior that creates an unhealthy and dysfunctional boardroom through inappropriate behavior or disrespect.
- Taking advantage of the company for his or her own gain.
Nevertheless, the removal of a director of company should only be opted for when absolutely necessary. It is the other directors and shareholders who make the decision regarding a director’s removal. A director should be removed from the board if he or she has not adhered to the company’s rules and has not fulfilled his fiduciary duties.
Director Removal
A director can be removed for the following reasons by the Board of Directors by a vote conducted at a board meeting. In any case, the concerned director has the right to respond.
Upon approval of the removal, the board must file Form DIR-12 with the Registrar of Companies (RoC). If Form DIR-12 is not filed, large penalties can be incurred. Following the completion of all the formalities, the director’s name will be taken off the Ministry of Corporate Affairs’ database, as well as the website.
Also,Read:
The 6 Rules of Removing a Director
