“Changing a Company's Directors means either an appointment of the director or removal & resignation of the directors as per the Companies Act, 2013. Though such change can be for any reason of Company, it has to be approved & authorized through Article of Association (AOA) and provisions of the Companies Act, 2013. Hence the resignation & appointment of the directors shall be in accordance with the provisions stated under Companies Act, 2013, and shall be supported by legal documentation and procedures. And such change shall be intimated to ROC on time.”
The board of Directors is the supreme authority having the management and control of the affairs of a company. They have a fiduciary duty to the company and its shareholders, which means to say that they are responsible for conducting the affairs of the company in a way that ensures success and profitability and thus enhancing the image of the company and its reputation. Section 149 of the Companies Act, 2013 provides for the constitution of the Board of directors. As per section 149, a Private Limited Company is required to have a minimum of two Directors and a Limited Company is required to have a minimum of three Directors.
A company shall have a maximum of 15 directors. However, a company may appoint more than 15 directors by passing a special resolution.
Directors are generally appointed as per the applicable provisions of the Companies Act 2013, by the shareholders of the company to ensure that the day to day operations of the company are executed in an efficient manner. They have a fiduciary duty to the company and its shareholders, which means to say that they are responsible for conducting the affairs of the company in a way that ensures success and profitability and thus enhancing the image of the company and its reputation.
The change in the directorship of a company is possible at any time as and when needed. The change can be either voluntarily or through demand. The demand arises in case there is a requirement of an expert in the board or due to resignation or death of an existing director.
Fundamental key-points and highlights for the change in the directorship of a Private Company or Public Company that should be considered by a company before initiating change in directors:
An individual who has been appointed or elected as a director of the company is responsible for implementing and determining the policies for the company, moreover, they are the members of the Board of Directors. Director is an individual who manages, directs, oversees, & controls the matters in the business. Section 149(1) of Companies Act, 2013, says that every company shall have a board that consists of directors.
2/3rd of the total number of directors has to be appointed by shareholders. Remaining 1/3rd get appointed as per the provisions of Article of Association of the company.
As prescribed in the Articles of the company. In the absence of an article, an appointment is to be made by shareholders.
A Director can be added in a company only in a general meeting with the approval of the shareholders. Hence a change in the directorship of a company is possible by adding a director in an annual general meeting or call an extraordinary general meeting. But sometimes it is not feasible to wait for an AGM neither is it possible to call an extraordinary general meeting. In these circumstances, a company can add an additional director in a board meeting and later on it can regularize such director in the upcoming AGM.
Once the Board Meeting has taken place, the person so appointed to circulate the notice regarding the General Meeting (“GM”), may issue to the notice to all of the following:
The notice of the GM has to be given not less than 21 days prior to the date on which the GM is to be held. However, a shorter notice period can be given if and only if the consent is given by not less than 95% of the members who are entitled to vote at the meeting. The consent has to be obtained either through:
At the GM, the resolution will be passed subject to the approval of the shareholders.
Form DIR – 12 has to be submitted to the Registrar within 30 days from the appointment being made.
There are no exact provisions for the qualification of directors in Companies Act, 2013. Although certain qualifications are required:
The resignation of a director may be considered by him giving the company a notice in writing regarding the reasons for such resignation.
The Board of Directors, on receipt of the notice given by the director, must present the same in the General Meeting to the shareholders so that they are informed of the same.
In the General Meeting, the fact regarding the resignation of the director must also be placed in the report of the directors laid before the shareholders.
The Company must also file Form DIR – 12 with the Registrar within 30 days of the date of resignation.
The effective date of resignation here will be the latest of:
The director will submit Form DIR – 11 along with the prescribed fees including a copy of his notice of resignation and the detailed reasons for the same to the Registrar of Companies (“RoC”) in less than 30 days from the date of resignation.
Removal only happens before the expiry of the director’s period of office.
Procedure to Remove a Director: