10 January 2012
There is no provision under the Companies Act, 1956 relating to the resignation of a director from his/her office. Thus, you need to examine the articles of association of a company or the terms of appointment to determine when and how a director can resign from his/her position as a director of a company.
I have one doubt. Passing a resolution for discontinuation of director.
Resignation is effective from the date of communication of the resignation letter. And if resolution could not be passed or resignation is not accepted, then?
in Mother Care (India) Ltd v Prof. Ramaswamy P. Aiyar (2004), it was held that once a resignation letter is submitted to the Board, the date on which intention to relinquish post is communicated to board would be the date from which the director ceases to be a director of the company.
So is holding board meeting for discontinuation of director is necessary or just a formality to acknowledge the resignation tendered by the director?
All experts are requested to throw light on this matter... Regards.
11 January 2012
Sanjay Sir, you are correct as this is a grey area, there is no specific provision under the companies act. But Sir what about Form 32, it is a statutory requirement to file for 32 for the cessation of the director and if we see the contents of the Form 32 it requires the authrisation for the signing of the form which indirectly says that holding board meeting is necessary, this is my interpretation, kindly correct me if I am wrong.
11 January 2012
Yes. Filing form 32 is must. But there can be a general authorization for filing forms and therefore holding BM may not be required. But yes as stated by Jitendra Ji this is the usual process to hold BM and acknowledge the resignation of the directors and also to acknowledge and appreciate his/her contribution.
11 January 2012
Resignation by a director from the Company Neither the Companies Act nor the Table A contains provision regarding resignation by a director. Moreover, section 283 also does not include resignation as one of the grounds for the vacation of office of a director. It is an inherent right of any person to render resignation and he cannot be compelled against his wishes to continue to function in the office for a day longer than he desires. The learned judges have held that vacation of office of a director by resignation cannot be a ground to be included in the Articles of a public company.
Effective date of resignation by the Director A director may at any time resign his office of director. Since there is no provision making acceptance of resignation necessary, a director vacates office on giving notice of his resignation.
In S.S. Lakshmana Pillai v Registrar of Companies (1977) 47 Comp Cas 652, the Madras High Court in this case held that in the absence of any provision in the articles, the ordinary rule of common law as regards resignation by an officer/agent must be followed viz., intimation by notice given either to the company or to the Board and acceptance of the same by them. Where a resignation states that it is to take effect on acceptance or the Articles so require, acceptance is necessary to end the tenure of office. Where, however, the resignation says that it is to take effect immediately, acceptance is not necessary, unless the articles or any provision of law makes it necessary. Any form of resignation, whether oral or written, is sufficient, provided that the intention to resign is clear. It is however advisable that the resignation is in writing and also indicates the time when it is to take effect, so that it may serve as a record of reference in case of controversy. In the absence of any indication otherwise, a resignation takes effect immediately. Resignation will not, however, relieve him from any accountability or other liability which he may have incurred while in office.
In Dushyant D Anjaria v Wall Street Finance Ltd. (2001) Comp Cas 655 (Bom), the court held that the resignation of a Director would be effective from the date it was submitted, for the reason that the letter brings out clearly the intention of the person to resign. So far as the formalities like filling up Form 32 and sending it to the Registrar of Companies were concerned, it was for the company to comply with them in conformity with the provisions of Sec. 302 or Sec. 303 of the Companies Act. Where there was delay or negligence on the part of the company in intimating the Registrar about the date of resignation, the Director who had resigned could not be saddled with responsibility and liability for such delay.
For Information: Provisions in The Companies Bill, 2011.... Clause 168 will deal with Resignation of Director.
168. (1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company:
Provided that a director shall also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed.
(2) The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later: Provided that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure. (3) Where all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting.
Re: Resignation from the office of the director of the Company
Dear Sir/s, I hereby tender my resignation from the office of the director of the Company with immediate effect and request that a notice of my resignation be given to the Registrar of Companies and the Board of directors be informed at their next Board meeting.
You please also arrange for cancellation of my personal guarantee provided to the Bank being a director of the Company.
I appreciate the Board of directors for having given me co-operation and assistance to discharge my duties during my tenure as a director of the Company.
I request you to please provide me a copy of the Form 32 filed with the Registrar of Companies to that effect for my reference and record.
Specimen of the Board resolution for acceptance of resignation
The Chairman placed on table a letter received from Mr. XYZ tendering his resignation from the directorship of the Company.
The Board considered and accepted his resignation from the office of the director of the Company. The Board placed on record its appreciation of the valuable services and guidance rendered by Mr. XYZ as the director of the Company. Thereupon, the Board unanimously passed the following resolution:
RESOLVED THAT the Board of directors of the Company do hereby accepts the resignation tendered by Mr. XYZ from the office of director of the Company w.e.f. ..... . and Shri ABC the director of the Company be and is hereby authorised to file form 32 to that effect to the Registrar of Companies.