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How to Add or Remove Director or Shareholder

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Introduction

A company is formed by two – Directors and the Shareholders, which are ultimately the spine of the company. Each of them has a prescribed role to perform. Directors is involved in the day to day activity of the company. Director’s main role to insure all the statuary compliances are filled on time and all the activities are conducted as per the objectives mentioned in company’s MOA. He has to ensure that there is no breech by the company in the Laws od Company’s Act 2013. Directors are considered as the trustees of company and are also involved in the transaction of the company.

The Shareholder can also be named as Stockholder as he owns the stocks or the shares of the company. Their main role can be considered as to determine and set the goals of the company which are ultimately accomplished by a Directors. Shareholders are involved in all the major decisions of the company like approving the financial statements in case of winding up the company.

These both together are responsible for the future and the growth of the company. However, sometimes there can be a need arises to change in management. This can be done anytime just by following with the prescribed procedure under the Companies Act, 2013.

SHARE HOLDER REMOVAL

  • Step- 1 – Investigate Share-holder agreement
    this is the crucial step as it helps to collect the details regarding the buyout of the shares. It also provides the information about authority who will approve or by which mode the removal of shareholder will be carried out like vote of the Board of Directors or vote of the shareholder.
  • Step – 2 - Board Resolution
    depending upon the Share Holder Agreement, board resolution is required to be pass
    ed and presented to board of directors.
  • Step – 3 - Resolution for Share-holder buyout
    it is carried out by director’s board meetings or shareholders by passing a resolution for shareholder buyout.
  • Step - 4 Voting
    the voting will be done against the resolution on passing the resolution.
  • Step 5 Purchase of shareholder stock
    the purchase of the shareholder’s stock is to be done by the company itself. The shares are then converted into treasury stock.
    The purchase of these shareholder stock can also be initiated by other shareholders who hold an interest in the corporation.
  • Step - 6 In case shareholder is devoid of removal clause
    In such case the company needs to take legal steps as mentioned in the Companies Act, 2013 for the Removal of a Shareholder.

REMOVAL OF DIRECTORS

  1. Voluntary Resignation –
    • Call for board meeting by providing minimum of 7 days’ notice. 
    • Voting on the resignation will be done and it will be decided whether to accept or reject.
    • The acceptance or rejection will be passed through resolution
    • On accepting the resignation, the director has to file form DIR-11 with board resolution and resignation letter as attachment
    • Intimation of the resignation of the director is to be done by company by filing DIR-12
    • Once the DIR 12 is approved the director will be removed from the company.
  1. Suo moto Removal
  • Call for board meeting by providing minimum of 7 days’ notice. 
  • In this Board Meeting resolution is passed for conducting the EGM by providing 21 days’ notice.
    • Voting will be done for the removal of director.
    • Once the resolution is passed the company will file the form DIR – 11 along with board resolution as attachment
    • Intimation of the resignation of the director is to be done by company by filing DIR-12
  • Once the DIR 12 is approved the director will be removed from the company.
  1. On not attending 3 consecutive Board Meeting
  • According to Section 167 of the Companies Act, 2013, if a Director didn’t attended 3 Board Meetings in the Financial Year then it will be treated as law breaching and considered as he/she has abandoned the company.
  • In this case the director will be removed from the company.
  • Intimation of the resignation of the director is to be done by company by filing DIR-12.
  • Once the DIR 12 is approved the director will be removed from the company.
  1. Removal of Director by the Central Government: 
    The government has a right to remove a Director, this can be due to -
    • In case of any fraud, default or misfeasance by director
    • Activity conducted against the objective mentioned in MOA
    • Transaction made which has resulted in injury to the trade policies of the company;
  2. NCLT Removal of Director
  • Company will have to file an appeal to prevent any mismanagement.
  • On receiving the appeal, the National Company Law Tribunal (NCLT) will remove the director and no compensation will be granted.

CONCLUSION

Director and Shareholders are the spine of the company involves in the management board. They run the operations of the company and it results in the growth of the company. These share-holders or directors are usually appointed at the time of company incorporation or in between anytime. However, there can be a need in the change of the management anytime. This process can be carried out just by filing of certain forms. But these filings require adequate knowledge and therefore, it is always advised to seek the guidance of professional. You can always reach out to Corpseed for any changes to do be done. All you need to do is to share your documents and leave rest to us.

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Get help from an experienced legal adviser. Schedule your consultation at a time that works for you and it's absolutely FREE.

Author
Shamshad Alam
Experienced Digital Marketer with a demonstrated history of working in the internet industry. He likes to write about the latest technology trends, Skilled in Digital Marketing likes. Search Engine Optimization, SMO, SEM, PPC, Content Writing, and, Designing, etc.