Removal of director

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Niraj Mahajan (Querist)
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27 November 2012 The situation is:
Pvt Ltd co. is formed in June 2012 with 2 shareholders Mr.X and Mr.Y both holding 5000 shares of Rs. 10 each (i.e. equal contribution)
And, there are 3 founding Directors: Mr.X, Mr. Y and brother of Mr.X say Mr.XB

There is some dispute betwn Mr. X and Mr. Y and thus, Mr.Y is to be removed as a Director. There cannot be any communication in this regard with Mr. Y
1. How to legally and amicably remove Mr. Y as a Director?
2. What are possible routes to remove Mr.Y?

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2012 Hi

The Removal should be made under section 284 of the Companies Act, 1956 and the same should be given in your company's articles.
For example:

The Articles of Association generally contain provision regarding removal of directors in the following manners "Subject to the provisions of Articles ........., the company may by ordinary resolution passed at a general meeting remove any director (not being a director appointed by the Central Government in pursuance of section 408 of the Act) in accordance with the provisions of section 284 of the Act. A director so removed shall not be re-appointed a director by the Board of Directors".

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2012 If no fixed period has been provided for retirement in articles of association of a private company, a director appointed is entitled to continue till he is removed in accordance with provisions of section 284.

Directors can be removed under section 284 by members in general meeting, whether they are subject to retirement or not in a public company.

It is a significant right vested with every member that a member who is entitled to attend a general meeting and move a resolution may give special notice of a resolution to remove a director at a general meeting or to appoint somebody instead of the director so removed.
A notice of intention to move a resolution for the removal of a director shall be given in writing.

The special notice can be given by even a single member irrespective of the number of shares he holds. The Karnataka High Court has observed in Karnataka Bank Ltd. v A.B. Datar (1994) 79 Comp Cas 12 (Kar) that section 284 is an independent provision and the procedure prescribed for removing a director cannot be subordinated to the provisions of section 188.

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2012
The special notice of resolution for removal of a director shall be served on the company at least 14 days before the meeting exclusive of the day on which it is served and the day of the meeting. [Section 190]

The director concerned shall be entitled to be heard on the resolution at the meeting. Where the director makes a representation in writing of reasonable length and requests circulation of the same to the members, the company shall unless the representations are received by it too late for it is required to do the following:—
(a) in any notice of the resolution given to members of the company, state the fact of the representations having been made; and
(b) send a copy of the representations to every member of the company to whom notice of the meeting is sent whether before or after receipt of the representations by the company, and if a copy of the representations is not sent as aforesaid because they were received too late or because of the company's default, the director may without prejudice to his right to be heard orally, require that the representations shall be read out at the meeting. However, the Central Government is empowered to order, on an application from the company or any aggrieved person, that the representation need not be sent to members nor read at the meeting, if the Central Government is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter; and the Central Government may order at the company's costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.

Ajay Mishra

Ajay Mishra (Expert)
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27 November 2012
Specimen of notice of resolution to be given to all the members

NOTICE is hereby given that an EGM of the company will be held on day, XX.XX.XXXX, at 11.00 A.M. at the registered office of the Company situated at 4th Floor, Silver Ark Plaza, 20/1, New Palasiya, Indore (M.P.) to transact the following business:—

1. To consider and, if thought fit, to pass, with or without modifications, the following resolution as an ordinary resolution, in respect of which a special notice has been received by the Company from a member(s) pursuant to section 284 read with section 190 of the Companies Act, 1956:
RESOLVED THAT Mr. XYZ be and is hereby removed from the office of director of the Company with effect from the conclusion of this meeting.
A written representation with respect to the resolution set out above for the removal of Mr. XYZ as a director have been received from Mr. XYZ in accordance with the provisions of section 284(4) of the Companies Act, 1956. A copy of the representations is enclosed to this notice.

By order of the Board of Directors

Director/Company Secretary

Date. XX.XX.XXXX MNO
Place. .....Indore (M.P.)

Niraj Mahajan

Niraj Mahajan (Querist)
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03 December 2012 Thank you Mr. Ajay

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