Ram Prasad Reddy
Asked December 17, 2016

Procedure to remove managing director

  • 2 Answers
  • 6084 Views

Managing director want to resign from a private limited companyso give me the proceedure for removing him from a company.

Answers 2

Power to remove a MD is bestowed on the shareholders of a company, as the MD is answerable to the shareholders only. Shareholders can remove a Managing Director before the expiry of his tenure, except in the case where a director has been appointed by a tribunal for prevention of oppression and mismanagement under section 24 of Indian Company Act, 2013 and Section 163 for proportionate representation.

Section 169 of the Company Act, give power to shareholders to remove the managing director in a general meeting by an ordinary resolution. However it can be taken away by the MOA and AOA or any other agreement of the company.

 

In KHETAN INDUSTRIES PRIVATE LIMITED VS. MANJU RAVINDRA PRASAD KHETAN: it was held by the court that the shareholders have a right to remove the directors under section 284 (Corresponding of Section-169 of Companies Act, 2013) by passing ordinary resolution and section 284 provides an inbuilt mechanism for the enforcement of the right and civil court has no jurisdiction to entertain the suit for removal of director.

In LIC of India v Escorts Ltd. (1986) it was held that it is not necessary to give reasons in explanatory statement for removal of a director as desired by section 173(2) (corresponding Section-102) 

It would be advisable to refer to this article for a better understanding:

http://www.simpletaxindia.net/2014/08/process-of-removal-of-director-under.html

Agree Comment 0 Agrees almost 4 years ago

A company is an artificial person, it is managed by the Board of Directors of the Company i.e., in relation to the company, means the collective body of the directors of the company. The Board may consist of Director including independent director, Managing Director, Chairman & Whole Time Director. A Managing Director can be removed from his post and he can continue to operate as the director. There are no specific grounds given in the Companies Act, 2013 under which a Managing Director can be removed. Hence, the decision to remove the Managing Director vests in the shareholders of the company.

Procedure to remove a Director

The shareholders of a company can remove any director through ordinary resolution before the expiry of his tenure, except any director appointed by the Tribunal for prevention of oppression and mismanagement under Section 242 and a director appointed under the principle of proportional representation under Section 163 of the Companies Act, 2013.

The right to remove a director vests in the shareholders of the Company and is the legal right of the shareholders. Section 169 and Chapter 7 of the Companies Act, 2013 contain the provisions relating to removal of a director before his term expires.

Procedure

1.

 

A Special Notice as per the provisions of Section 115 of the Companies Act, 2013 of the intention to move a resolution for removal of the director be furnished by number of members to the company at least 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served and the day of the meeting.(Section 169)

2.

 

The Company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting.

3.

 

In case the company is not in a position to give notice to all the members, it can publish by way of an advertisement in the newspaper having an appropriate circulation not less than 7 days before the meeting.

4.

 

The Company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The Director shall have the right to be heard on the resolution at the meeting.

5.

 

The Director who is sought to be removed, can make a representation in writing against his removal and request the Company to notify it to the Company's members. Further, if the director requests the company to notify the members of the company his representation against his removal and the representation is of reasonable length and it has been received not too late, the company must :

 

(a)

 

mention in the notice of the resolution to be moved at the Annual General meeting, the fact of the representation having been received; and

(b)

 

send a copy of the representation to every member along with the notice of the meeting if the representation has been received before sending the notice of the meeting or separately if the representation has been received after sending the notice of the meeting.

 

6.

 

If the representation could not be sent to the members because it was received too late or because the company made a default in sending it, the company must read out the representation at the Annual General Meeting, if the director requires it to do so. In addition to the above, the director can make oral representation at the Annual General Meeting.

7.

 

Thereafter hold and convene a General Meeting to discuss besides other matters, if any of the following matter relating to removal of director:

 

 

"To pass a ordinary resolution for removal of the Director"

8.

 

If the company is a listed entity then it should file a copy of the proceedings of the General meeting before the Stock Exchange(s) where the securities of the company are listed.

9.

 

The company also to file Form DIR-12 in e-form with the Registrar of Companies within 30 days of passing the resolution along with certified true copy of Special Notice received from the shareholders, proof of delivery of Special notice to the director concerned, Notice of EGM to other shareholders and certified true copy of the resolution passed at EGM for removal of the director.

10.

 

The Company should pay the requisite fees, as prescribed under the Companies ( Registration Offices and Fees) Rules, 2014.

 

Agree Comment 0 Agrees over 3 years ago

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