Procedure To Appoint Or Remove a Director Of A Private Limited Company

A Private Limited Company top decision-makers are directors, who, in addition to serving as trustees, agents, employees, and officers of the corporation, also perform various other duties. They oversee and manage the company’s services. Changes in leadership, whether through the appointment of new directors or the removal of existing ones, are made to better serve the firm by bringing in new perspectives and expertise.

The Board of Directors (BoD) of a private limited company is responsible for accepting resignations from directors, while shareholders’ approval is required for the nomination of directors. Regardless of whether the change is an appointment, dismissal, or resignation, the alteration does not take effect immediately. Instead, the company must send an intimation to the Ministry of Corporate Affairs.

Appointment of Directors by companies act 2013

The organization appoints directors either by issuing Articles of Association (AOA) or by utilizing Section 152 of the Indian legislation, which designates memorandum subscribers as company directors. The Companies Act 2013 delineates various types of directors.

Which includes:

• A female director must serve on the board of directors if a company’s paid-up capital is ₹100 crore or more, or its annual revenue is ₹300 crores or more, as per the Companies Act.
• An independent director, as defined by Section 149(6), plays a crucial role.
• Directors nominated by small shareholders are appointed under Section 151.
• The company must have a resident director who lived in India for 182 days in the preceding year.
• A director is appointed under Section 161, and, according to Section 161(2), an alternative director can be chosen if the primary director is absent for at least three months.
• In cases of mismanagement or persecution of an existing director, the Central Government or a third party may appoint nominated directors under Section 161(3).

Procedure for Appointment of Private Limited Company Director

The process of appointing a director in private limited company is as follows:

·       Form DIR 2 – Director’s Consent

The firm must first obtain the proposed director’s permission to appoint them. The proposed director’s approval to serve as a director in the firm must be submitted in Form DIR 2, along with the other required documents.

·       Get the Director’s DSC and DIN

Next, the company needs to acquire the Digital Signature Certificate (DSC) and Director Identification Number (DIN) of the proposed director. If the proposed director does not already possess a DSC, they are required to apply for one from the relevant authorities in India.

·       Call the Board and EGM

1. The firm will take decisions on the appointment of a director at a general meeting. Accordingly, the firm will notify all its shareholders that it will be conducting an Extraordinary General Meeting (EGM).
2. After sending the notice to call for the EGM to all shareholders, the next step is to hold the meeting at the specified time and date and pass all the required resolutions for the director’s appointment in the company.

·       Letter of Appointment

After the approval of the resolution, the new firm director will receive a letter of appointment. This letter will detail the director’s salary and other benefits.

·       DIR-12 to ROC

The firm must submit Form DIR 12 and other supporting documentation to the Registrar of Companies (ROC) within 30 days after the appointment of the Director.

Private Limited Company Director Appointment and Resignation Documents

1. Photograph: Passport-size photograph
2. PAN Card: Self-attested Personal Identification Number card
3. Proof of residency: Aadhar/Voter ID/Passport/Driving License
4. Digital Signature Certificate
5. A valid form of identification: A passport, voter’s card, driver’s licence, or Aadhar card
6. Director’s personal and official email addresses
7. All official records must be apostilled if the director is not based in India
8. Submitted resignation notice of the previous director

Removal of the Private Limited Directors

According to The Companies Act, 2013, a private limited company must have at least two Directors before officially beginning operations. Except in circumstances of government appointment, shareholders can vote to remove a company director at the General Meeting. A director of the firm may be removed when one of the following conditions is met:

• If a director does any action that could result in disqualification under the Act
• If a director has missed more than one year of Board meetings
• If a director has announced a voluntary resignation
• If a director is indefinitely suspended from participation by the court or the Tribunal
• If a director commits violations of Article 184 by signing contracts
• If a director is found guilty on charges and given a prison term of at least six months.

Procedure for removal of Private Limited Company Director : Removal Process

A director may be removed from their position in two situations: if the firm decides to do so or if the director misses three consecutive board meetings. The removal process for both follows as follows:

1. If the Board of Directors decides to remove the Director of Private Limited Company

• The company will inform the Board of Directors of any proposed removal of directors at least seven days in advance.
• If the board requires shareholders’ agreement (SHA), they will vote to call an extraordinary general meeting (EGM) and remove the director.
• A notice of seven days will be given before the company’s board members hold the next board meeting. The corporation has 21 days to issue this notice.
• The Board of Directors will deliberate on whether to dismiss the director at their next meeting.
• Before voting on the final decision, the director is free to make any arguments in their favor.
• Following the adoption of this resolution, two DIR-11 and DIR-12 forms will need to be submitted. The director submits the Board Resolution (DIR-12) to the Registrar of Companies (ROC) Filing, while the company presents the DIR-11.
• The director’s name must be deleted from the Ministry of Corporate Affairs (MCA).

2. Removal of Directors of Private Limited Company If the Director skips three consecutive Board meetings

According to Section 167 of the Companies Act of 2013, Private Limited Company Director can be removed if a director fails to attend three consecutive Board meetings during 12 months, they are deemed to have resigned. This 12-month period begins from the day they missed the first board meeting, even if notified in advance.

If a director is absent and the FORM DIR-2 is submitted, it will be treated as though the director has resigned.

Once this is done, the MCA’s online database will erase the private limited company director name.

Conclusion

A Private Limited Company director holds various essential responsibilities. Hence, having the right individual or individuals to fulfill those duties is crucial. The process of appointing and removing a private limited company directors is continuous throughout the life of an organization. When lacking a company structure and shareholders’ agreement, it becomes necessary to adhere to statutory procedures for the appointment or removal of a director. For guidance on appointment and removal rights and conditions or to become a firm director, reach out to Complianto.