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Addition and Removal of Director

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Addition and removal of director in a company

Company Directors plays main role in its function. Directors take day to day decision or business operations. Directors are key persons on whom trust shareholders invested their money in a company. So, it becomes very necessary to add or remove a director for the benefit of the company and its shareholders.

For adding new director to a company, a company has to mandatorily fill a copy of the resolution along with form DIR-12 and form DIR-2 and form DIR-8 within 30 days to registrar of companies (ROC) or Ministry of Corporate Affairs (MCA) from the date of passing resolution.

Common reasons to add and remove a director in a company

The following are common reasons why company chooses to add or change directors in a company.

To introduced new talent on board: As your company grows, you will need to bring new talent on board to meet the new requirements and challenges. It is very natural to make changes in top level management.

No dilution of ownership: Directors are primarily responsible for the day to day operations of a company. Adding or appointing a new director helps the shareholders assign operational responsibilities without losing any strategic control.

Inefficiency of existing directors: It may be happen the existing directors cannot meet the requirements of the work or may or maybe even due to retirement, family problem, physical elements, in case of sudden death or other reasons, you need to add new directors or remove directors.

What is the normal process to add a director in a Company

Following is the procedure to adding a director in a company.

Obtain the consent of the proposed director:  The proposed director should give consent to act as director in the company, as per Form DIR-2, this is a very important document and the company should obtain the Form DIR-2 before proposing  to the director of the company.

Digital signature of the proposed director:   If the proposed director does not have digital signatures, they will have to obtain a digital signature from the Certification Authority in India.

Get Director Identification Number (DIN):   If the proposed director does not have a DIN, the company should apply for DIN number of the proposed person. The resolution required to attach to form DIR3. This is the new requirement for obtaining a DIN. The DIN allocated only once for the lifetime of the director.

Issuance of general meeting notice:  The director of the company appointed at the general meeting, the company should issue a notice to all the shareholders of the company to hold the extra ordinary general meeting of the company.

Hold the Company Extraordinary General meeting:    Once the EGM Notice issued to the shareholders, now on the date and time of the meeting, hold the meeting and approve the resolution necessary for the appointment of the director as Company.

Issue Appointment Letter:  Now issue appointment letter to the Company Director mentioning the terms, and conditions of appointment and salary to pay to the Director.

Filing of Form DIR 12: Once all the above steps are completed, the company must submit Form DIR 12 to ROC within 30 days from the date of the appointment of the Director. It is always recommended to submit Form DIR 12 within the day following appointment to avoid delays.

 

Documents required for the addition of director in a Company

TRUSTLINK offers a very smooth procedure to add new director in a time bound process keeping in mind all compliance matters to avoid any complications in later stage of the company.

  • Passport/Voter ID/Driving License of the new Director
  • Identification proof (PAN card)
  • Passport size photograph
  • Proof of residence (electricity bill, rental agreement, Aadhar card, voter ID etc)
  • PAN card, mandatory for an Indian applicant

Passport is mandatory for foreign applicant.

 

Common reasons to remove a director in a Company

A company has the authority to remove Director by passing an ordinary resolution, unless the director was not appointed by the Central Government. A private limited company can remove a director, if he is found to be incompetent as per the law specified in Companies Act. Reasons for director’s removal may be:

  • Dispute with the board
  • Voluntary resignation
  • Misuse in company affairs.
  • Suspension due to infringement.
  • On recession of nomination.
  • Absent of the director in three consecutive Annual General Meeting

What is the process to remove a director in a Company

A board meeting will be called by giving seven days notice to all directors. A special notice will go to the directors informing them about the removal of director.

A general meeting will be held by giving 21 days clear notice. In the meeting, the members will be asked to vote on the matter. If the majority is in favour of the decision, the resolution will be passed.

After the passing of the resolution, the same procedure will be followed, and the forms DIR-11 and DIR-12 will be filled along with the same attachments of the Board Resolution, Ordinary Resolution.

After the filing of the forms, the name of the director will be struck off from the Ministry of Corporate Affairs website.

Documents required for the removal of director in a Company

TRUSTLINK offers a very smooth procedure to add new director in a time bound process keeping in mind all compliance matters to avoid any complications in later stage of the company.

  • Passport/Voter ID/Driving License of the new Director
  • Identification proof (PAN card)
  • Passport size photograph
  • Proof of residence (electricity bill, rental agreement, Aadhar card, voter ID etc)
  • PAN card, mandatory for an Indian applicant.
  • Notice of Resignation filled with the company.
  • Proof of dispatch
  • Acknowledgement of form, if received.

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