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Expulsion of a director

CA KSB (Asst Manager) (105 Points)

02 March 2010

Can anyone plz tell me the procedure for expelling a director from a Private Limited company

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8 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 02 March 2010

REMOVAL OF DIRECTORS

Provisions for removal of director are governed by section-284 of the companies act, 1956. As per this section 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.

A notice of intention to move a resolution for the removal of a director shall be given in writing.

Please check your articles as 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 in accordance with the provisions of section 284 of the Act.

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CA KSB (Asst Manager) (105 Points)
Replied 02 March 2010

Sir , then i need to see AOA also for this purpose,

1)Is there any form to be filled with ROC and if so which is that form?

2) Here only two directors( subscribers to MOA & AOA). The expelled director will not be available?

What can be done? any solution except winding up?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 02 March 2010

Before removal of director you have to appoint a new director as additional director.

Ordinary Resolution for removal of director is required to be passed in the General Meeting and for holding general meting there must be atleast 2 members present in the GM as quorum u/s 174.

After passing Ordinary Resolution for removal of director you have to file form 32 for vacation of office of director within 30 days of general meeting.

CA KSB (Asst Manager) (105 Points)
Replied 02 March 2010

Thank you very much sir.. Thanks a lot............

Sanjay Sharma (CMD) (40 Points)
Replied 05 March 2010

After asking a Director to resign what will happen to the shares hold by the Director. Ideally the shares should be transferred to another person who can pay for those shares and buy them, as you will need outgoing Director to sign the Share Transfer Deed. Right ? But what will happen if they cannot agree on the payment and payment schedule for transfer of share. Does outgoing Director continues to be share holder of the company?

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 05 March 2010

YES.

Your observation is correct and outgoing Director continues to be share holder of the company. Vacation of office as director does not mean the termination of membership.

Regards

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 06 March 2010

The person who is resigned or removed from the directorship of the Company may remain the Shareholder of the Company.

Sanjay Sharma (CMD) (40 Points)
Replied 09 March 2010

Normally in pvt. ltd. companies it is seen that the minority holder is being asked by the majority holder. This could be result of several issues, misunderstanding or majority holder wanting full control of the company yada.. yada.. In one such scenario one of my friend holding just 9% of shares of the company was asked to leave the company and was promised an Rs. X Lakhs. My client was relieved from Directorship & job but since the other person did not paid for the equity, he still continues to be shareholder of the company. My friend knows that the promoter has been misusing companies assest for his personal gains and running couple of companies as subsidiary companies just on paper. This is ofcourse affecting financial health of the company but the promoter is benefited as he is taking out cash from all companies in fictious transactions.

Is there anything my friend can do to stop this? Should he report the matter to Tax authorities? If yes, where to find these details? Either way, being shareholder of the company, this is affecting the value of his own holding in the company. What should be his approach?