Amended and updated notes on section 169 of Companies Act 2013. Detail discussion on provisions and rules related to removal of directors.
Chapter XI (Sections 149–172) of the Companies Act, 2013 (CA 2013) deals with the provisions related to appointment and qualifications of directors. Section 169 of CA 2013 provides for removal of directors.
Recently, we have discussed in detail section 168 (Resignation of director) of CA 2013. Today, we learn the provisions of section 169 of Companies Act 2013.
The provisions of section 169 are effective from 1-April-2014. You may refer Notification No. S.O. 902(E) issued dated 27.03.2014. In this article, you will learn detail of the provisions of section 169 of the Companies Act 2013.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XI |
| Chapter Name | Appointment and Qualifications of Directors |
| Section No. | 169 |
| Section Name | Removal of directors |
| Monthly Updated Edition | Company Law PDF |
Procedure for Removal of Director of a Company
Ordinary Resolution [Section 169(1)]:
Shareholders are the real owner of any company and therefore they have full right to appoint and remove any director of a company. As per section 169(1) of the CA 2013, a director may be removed by the company by passing an Ordinary Resolution (OR) in General Meeting (GM) even before the expiry of the period of office of director.
In other words, a company may, by ordinary resolution, remove a director. Note that a reasonable opportunity of being heard shall be given to director before removal.
According to the provisions of section 114(1) of the Companies Act, 2013, a resolution shall be an ordinary resolution if the notice required under CA 2013 has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case may be, in favour of the resolution, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.
FORMAT OF NOTICE FOR CALLING EGM
(Read Section 100 of the Companies Act 2013)
Dated: _________________
The Board of Directors FOR IMMEDIATE ACTION
_______________Private Limited
____________________
____________________
Sub: Requisition pursuant to Section 100 of the Companies Act, 2013 for an Extraordinary General Meeting of __________________ Private Limited.
Dear Sir,
I, the undersigned, member of ________________ Private Limited holding, as the date hereof, ___________ equity shares in the capital of the company, representing __________% of the share capital of the company.
Pursuant to Section 100 of the Companies Act 2013, we, being holder of not less than one-tenth of the paid-up capital of the company carrying the right to vote at the general meeting, hereby require you pursuant to section 100 of the Companies Act 2013 forthwith to proceed to duly convene an Extraordinary General Meeting (EGM) of the Company for the purpose of passing the following resolution:
AS AN ORDINARY RESOLUTION
“RESOLVED THAT Mr. __________________ be and is hereby removed from his office as the director of the company with immediate effect.”
Please take all the necessary action to call for the said EGM in accordance with Section 169 of the Companies Act 2013.
Yours faithfully
______________
Name of Shareholder
Folio No. _____
However, if the Tribunal (Under Section 242) has appointed any director to the company then the same director shall not be removed by shareholders before expiry of the term of office. Further, the proviso of section 169(1) explained that the provision of sub-section (1) of section 169 shall not be applicable on director appointed according to the principle of proportional representation under section 163 of the Companies Act, 2013.
That means directors appointed by Tribunal as well as proportional representation shall not be removed under section 169 of the CA 2013.
Special Notice [Section 169(2)]:
A special notice shall be required of any resolution, to remove a director under section 169, or to appoint somebody in place of a director so removed, at the meeting at which he is removed. Shareholders shall send a notice to the Board of Directors (BOD) of the company to remove a director. In compliance with section 115, a Special Notice shall be send only by such number of members holding:
- not less than 1% of total voting power; or
- holding shares on which such aggregate sum not exceeding ₹5,00,000, as may be prescribed, has been paid-up.
FORMAT OF SPECIAL NOTICE FOR REMOVAL OF DIRECTOR
Dated: _______________
The Board of Directors FOR IMMEDIATE ACTION
_________________ Private Limited
___________________________
Dear Sir,
Sub: Special Notice of intention to move resolution in connection with the removal of a Director.
Further to our letter dated __________ (a copy of which is enclosed) in relation to the requisition for an Extraordinary General Meeting (EGM) of ___________ Private Limited, we, the undersigned members of the company, hereby give SPECIAL NOTICE pursuant to section 169 read with section 115 of the Companies Act, 2013, of our intention to move the following ordinary resolution in connection with the removal of Mr. _______________ as a director of the company at an EGM to be convened.
ORDINARY RESOLUTION
“RESOLVED THAT Mr. ___________________ be and is hereby removed from his office as the director of the company with immediate effect.”
Thanking you
Yours faithfully
______________
Name of Shareholder
Folio No. _____
Intimation to Director [Section 169(3)]:
On receipt of notice of a resolution to remove a director under section 169, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.
FORMAT OF INTIMATION TO CONCERNED DIRECTOR
Dated: _______________
To
Mr. _______________
Director of ___________ Private Limited
Dear Sir,
We enclose a copy of the special notice, which has been received by the Company from its member. As appears from the notice, a resolution is proposed at the next EGM of the Company for your removal as the director, pursuant to the provisions of section 169 of the Companies Act, 2013.
Your attention is drawn to the provisions of sub-section (4) of section 169 of the companies Act, 2013 [copy enclosed for reference]. In case you intend to make representations against the resolution for your removal, we request you to send the representations so as to reach us by ______________, so that it may be circulated to the members of the Company. In the event, the representations are not received by the aforesaid date; the same may be read out at the meeting.
Kindly acknowledge the receipt of letter for our reference and record.
Yours faithfully,
For ____________ Private Limited
________________
Director
DIN: ________
Representation to Members [Section 169(4)]:
Where notice has been given of a resolution to remove a director under section 169 and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so, —
- (a) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and
- (b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company),
and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting. Note that fee of ₹1,000 shall be paid for application for not sending copies of representation.
Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
Appointment of another Director [Section 169(5)]:
A vacancy created by the removal of a director under section 169 may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under section 169(2).
Tenure of Another Appointed Director [Section 169(6)]:
A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed.
Casual Vacancy [Section 169(7)]:
According to section 169(7) of the Companies Act 2013, if the vacancy is not filled under section 169(5), it may be filled as a casual vacancy in accordance with the provisions of this Act. Note that the director who was removed from office shall not be re-appointed as a director by the Board of Directors.
Depriving of Compensation or Damages or Derogating from Power [Section 169(8)]:
Nothing in this section shall be taken—
- (a) as depriving a person removed under this section of any compensation or damages payable to him in respect of the termination of his appointment as director as per the terms of contract or terms of his appointment as director, or of any other appointment terminating with that as director; or
- (b) as derogating from any power to remove a director under other provisions of this Act.
Accordingly, Section 169 shall not deprive removed director from compensation or damages. On the other hand, section 169 shall also not derogate from any power to remove director under other provisions of the Companies Act 2013. As per Rule 79 of National Company Law Tribunal (NCLT) Rules, 2016, the Company or any other person who claims to be aggrieved may make an application to the Tribunal in Form NCLT-1.
Section 169 of Companies Act 2013: Removal of directors
Section 169 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014 except sub-section (4) which shall come into force on 1st June, 2016 vide Notification No. S.O. 1934(E) issued dated 01.06.2016.
(1) A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard:
Provided that an independent director re-appointed for second term under sub-section (10) of section 149 shall be removed by the company only by passing a special resolution and after giving him a reasonable opportunity of being heard:
Provided further that nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two thirds of the total number of directors according to the principle of proportional representation.
(2) A special notice shall be required of any resolution, to remove a director under this section, or to appoint somebody in place of a director so removed, at the meeting at which he is removed.
(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.
(4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so, —
- (a) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and
- (b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company),
and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting:
Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
(5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under sub-section (2).
(6) A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed.
(7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions of this Act:
Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors.
(8) Nothing in this section shall be taken—
- (a) as depriving a person removed under this section of any compensation or damages payable to him in respect of the termination of his appointment as director as per the terms of contract or terms of his appointment as director, or of any other appointment terminating with that as director; or
- (b) as derogating from any power to remove a director under other provisions of this Act.