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Addition and Removal of Director
Expert guidance and seamless procedures to manage your company's board of directors
Role of Company Directors
Company Directors play a main role in its function. Directors take day-to-day decisions or business operations. They are the key persons on whom shareholders trust and invest their money in a company.
Because of this critical role, it becomes very necessary to know how to properly add or remove a director for the benefit of the company and its shareholders.
Statutory Requirement
For adding a new director to a company, the company has to mandatorily file a copy of the resolution along with the following forms to the Registrar of Companies (ROC) / Ministry of Corporate Affairs (MCA) within 30 days from the date of passing the resolution:
- Form DIR-12: Particulars of appointment of Directors and the key managerial personnel.
- Form DIR-2: Consent to act as a director of a company.
- Form DIR-8: Intimation by Director about disqualification.
Why Companies Add or Remove Directors
There are several scenarios where a company may choose to restructure its board by adding new directors or removing existing ones.
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Introduce New Talent
As a company grows, fresh perspectives and new talent are often required on the board to meet new operational and market challenges effectively.
No Ownership Dilution
Adding directors allows companies to delegate business operations to skilled individuals while existing shareholders retain full financial control and ownership.
Inefficiency / Life Events
Directors may need to be replaced due to personal reasons such as retirement, family problems, physical health issues, or unfortunately, sudden death.
Disputes & Suspensions
Removal can happen due to disputes with the board, performance issues, misuse of company affairs, absence in 3 consecutive AGMs, or voluntary resignation.
Process to Add a Director
Adding a director involves strict compliance with MCA guidelines. Here is the step-by-step process:
1. Obtain Consent & DSC
First, obtain the consent of the proposed director using Form DIR-2. Ensure the proposed director has a valid Digital Signature Certificate (DSC).
2. Apply for DIN
Apply for a Director Identification Number (DIN) using Form DIR-3 if they don't have one. A DIN is valid for a lifetime.
3. Hold EGM & Resolution
Issue a notice for a General Meeting. Hold the Extraordinary General Meeting (EGM) to pass the resolution for appointment, followed by issuing an Appointment Letter detailing terms and salary.
4. File Form DIR-12
Filing of Form DIR-12 with the MCA must be completed within 30 days of the appointment. It is highly recommended to file it immediately.
Documents Required for Addition
TRUSTLINK offers a smooth process with complete compliance support. Required documents include:
- Passport, Voter ID, or Driving License. (Note: Passport is mandatory for a foreign applicant)
- PAN Card (Mandatory for Indian applicants).
- Recent Passport size photograph.
- Address proof (Electricity bill, Rent agreement, Aadhaar, Voter ID, etc.).
Process to Remove a Director
A company can remove a director by passing an ordinary resolution, provided the director was not appointed by the Central Government. The process is as follows:
1. Board Meeting
Convene a board meeting by giving 7 days' notice to all directors. A special notice regarding the removal must be sent to the concerned director.
2. General Meeting
Hold a General Meeting by providing a 21 days' notice to members. The matter is put to a vote by the shareholders.
3. Passing Resolution
If the majority agrees, an ordinary resolution is passed for the removal of the director.
4. MCA Filing
File Form DIR-11 and DIR-12 with the MCA, attaching the Board and Ordinary Resolutions. After filing, the name is removed from MCA records.
Documents Required for Removal
- Passport / Voter ID / Driving License of the director.
- PAN Card and Passport size photograph.
- Address proof.
- Notice of Resignation filed with the company (if voluntary).
- Proof of Dispatch of notices.
- Acknowledgement receipt (if applicable).
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