How to Change a Director in Private Company?
Posted on: 2018-05-13 23:45:24
There are several issues may come why a director need to be fired, if a director engages in illegal activity, fraud, bankruptcy or some other wrongdoing, the company can remove or change the director for the cause.
Out of them just in below paragraph we have given a hint that can leads to change of a director and in this post you will get a brief information on legal process to add or remove a director in a company.
Every company has ups and down. If your business is always in growing position then you are performing well and this credit goes to management team and next to the director. And if it is going down gradually by mistakenly, surely many issues will come on the business and everyone’s eye will be focus to director what he is doing.
If he is not responding at all and not taking any concrete solution to business, company can take action on him/her and think about for option B, it may be replacement of that post.
So that's why, we prepared this post simple and concise to read, understand and acquired knowledge on how to change or add/remove a director in a company with respect to the company necessity.
Here we have given a real time example on this topic for better understanding and clear vision that helps you to know the logic behind it.
Scenario Based Example:
A client came to us and asks we want to change our director, so please tell us what are the legal formalities belongs to it.
As we are legal consultants, we should know the cause of replacement of director. Why they are so insisted to remove that director and what is the cause behind it? We asked the same thing to them why you want to change that director and did he made anything mistake. See what they said as their statement:
1. He got found bankruptcy
2. Not attending the office meeting
3. Not taking solid solution for company growth
3. Now he is becoming unsound mind
4. Pre-occupation in other/family business
5. Showing health issue
Just like any other legal procedure in India there are definite rules and regulations that have to be followed while changing the director or designated partner of a company. One of them is that you need proper legal papers in order to make such changes; there has to be a board resolution for the same; and the proper forms need to be filed the right way with the Registrar of Companies (ROC) in your state.
The appointment of directors
In India, directors are selected in a company by its Board of directors and in some cases the Shareholders. Their main task is to manage the company. The Companies Law of 2013 deals with this.
It states that there should be at least two directors in a private limited company and in a limited company there should be a minimum of three directors. When it comes to a limited liability partnership (LLP) there are designated partners. As per the Limited Liability Partnership Act, 2008 there should be at least two designated partners in a company. There could be several reasons as to why these companies may feel the need to appoint or remove directors.
Adding and Removing Directors
Procedure/Steps for Changing Director in a Company
Here we just simplified the procedure into certain steps to change the director of a company. I think you will be easy with this process for a quick hack and will get a brief explanation from the below steps.
Appointment of Additional Director
1. Obtain DSC (Digital Signature Certificate) for Director
2. Obtain DIN (Director Identification Number) for Director
3. Drafting of resolution for Board Meeting, letter of Appointment on issue of adding Director in a Company
4. Appointment of additional director has to be confirmed in upcoming EGM/AGM.
5. File eForm DIR-12 within 30 days from passing a Board Resolution towards Registrar of Companies certificate by Company Secretary/Chartered Accountant/Cost Accountant in practice.
6. It will be updated in the master data once we file the form.
Procedure for Removal of Director
For the removal of director in a company, the same process have to carry out as mentioned above in appointment of additional director process, but you have to leave the step.1 and step.2 which is not required at all for resigning process and you should follow the other remaining steps.
Once again we mentioned the steps below here for your better clarification and understanding
1. Removal of Director, by passing a Board Resolution.
2. File eform-DIR-12 within 30 days from passing a Board Resolution towards Registrar of Companies certificate by Company secretary/Chartered accountant/Cost accountant in practice.
3. It will be updated in the master data once we file the form.
The first thing that you need in order to add either one of the two designations being talked about over here is a digital signature.
Once you get the digital signature a director or designated partner could be added to the company. In case of a director the consent of shareholders is needed as well. As far as removing them is concerned, the first thing that needs to be ensured is that even after the removal there would be the requisite number of designated partners or directors in that company. After that the company in question needs to make sure that there is a proper resignation letter submitted with the form that needs to be filled up for the resignation to take effect.
As such the process of changing these office bearers, no matter how important they are, is not that a major one as such. In order to become the director of a company you need to be at least 18 years old and you should have a director identification number (DIN) as well. The nationality of the person is not really that important over here – she or he could be an Indian national or a foreign national as well.
Normally in order to remove a director a company needs to wait till its annual general meeting where it can pass an ordinary resolution to the effect.
However, such decisions can be taken in an extraordinary general meeting as well. You need a simple majority in order to pass the ordinary resolution to remove the director. After the resolution has been passed the company has to file the same alongwith forms that are necessary for the purpose with the union ministry of corporate affairs of India. In fact, these days, such work can even be done by chartered accountants (CAs) as well. Apart from that there are plenty of companies that are willing to provide useful services in this regard.
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