Change in directorship of a company: Addition & Removal of Directors

The change in directorship of a company is possible any time as and when needed. The change includes addition and removal both. There can be voluntary change or due to the demand in change. The demand arises in case of need of an expert in the board or due to death or resignation of an existing director. In any such event, to exhibit the change a company must follow the rules specified under the Companies Act. 

Addition of director 

A director can be added in a company only in a general meeting with the approval of the shareholders. Hence a change in the directorship of a company is possible by adding a director in an annual general meeting or call an extraordinary general meeting. But sometimes it is not feasible to wait for an AGM neither is it possible to call an extraordinary general meeting. In these circumstances, a company can add an additional director in a board meeting and later on it can regularize such director in the upcoming AGM.

Prerequisites to appoint a Director 

• Digital Signature 
• The director must have a DIN 
• Consent to act as a director in form DIR-2 

Process of an addition of Director 

In General Meeting or Extra Ordinary General Meeting: 

• Send notice to directors to call the board meeting 
• Pass a board resolution to call General Meeting 
• Send Notice to all the shareholders 
• Pass resolution in AGM or EGM 
• File form DIR-12 with MCA 

Appointment of additional director 

• Send notice to directors to call the board meeting 
• Pass resolution for the appointment 
• File form DIR-12 with MCA 
• At the time of AGM, pass a resolution to regularize the additional director 
• File form DIR-12 with MCA 

Removal of director 

A director can voluntarily resign from the company or a company can remove the director with a reasonable cause. But in either of the cases, the total number of directors must not be less than 2. If the company receives the letter of resignation then the company shall take a record of it by passing a board resolution. The director is deemed to have resigned from the date on which the company receives the notice from the director or the date specified if any by the director in the notice, whichever is later. The company has to file a form with MCA within 30 days of the resignation.  

Removal of Director by shareholder 

A company can remove its director before the expiry of the period offer by passing a shareholders resolution. The company must send the notice to all the members. Also, the company has to intimate the director about the removal.  Such a director will have an opportunity of being heard. He may send his statement to the company and company may circulate it to the members. If the time period is short then such statement may be read in the general meeting. If members deem fit, they may remove the director by passing an ordinary resolution.  The company must file the form for removal of a director with MCA within 30 days from the removal.  

Director and shares held by directors 

It is assumed that every director must hold shares of the company and so the new director is not added. But the fact is – it is not mandatory for every director to hold shares. Change in directorship is possoble adding a without offering the shares. Secondly, it is also assumed that if the director resigns from the company then he/she needs to surrender the shares. But it is not mandatory; such director can remain a shareholder in a company after leaving directorship. 

Conclusion 

The company has perpetual existence and is independent with the change in management or the members. So the company is not affected by any change in directors. But it is important to report such changes with the regulating authorities. Hence the company shall follow the procedure and file necessary forms.