removal of a director

Originally posted by : Suresh
	Dear friends, I am a share holder of a private company and my mother and another lady are the directors of the company. Myself and my mother hold all the shares of the company. The other director does not hold any shares. Now I need to remove the other director and nominate myself or somebody as director. Board resolution in this case is not possible to appoint another director. Is it possible to remove a Director with no share holding  in a meeting called by shareholders and appoint myself as a Director if the law permits or appoint any other person as Director? What remedy is available if 1.  The registered post/Certificate of posting notice is not received and acknowledged by the other director and later contend that she was not informed of the meeting 2.  Will the physical delivery of the notice by courier or ordinary post be counted as legal? 3.  Can this Director be removed in absentia by mentioning in the minutes of the meeting. Will it be valid?   Experts pls. advice

Dear Suresh,

The easiest and best way to remove another director is to appoint a new director as an Additional Director and thereafter take resignation from director, who is to be removed. It appears that this is not possible in your case.

In the situation mentioned by you, the best way in my opinion is to remove this director by sending a Special Notice u/s- 284 of the Companies Act to the company for his removal by one of the member of the company (i.e. by you in this case). Thereafter company will forward this Special Notice to that director and will also convene EGM for the said purpose. In the EGM, the director in question may be removed. 

Alternatively this Director can also be removed in absentia by mentioning in the minutes of the consecutive 3 Board Meetings or 3 months, whichever is later.  But you have to keep proof of despatch of notice of Board meetings to that director.

Opinion of other experts are solicited.

Thanks,
 

Dear Satendar Kumar

Thanks for your reply.

The crux of the above issue lies in issuing notice and acknowledging it. One of my queries was what if the person refuses to take the registered post or certificate of posting and later contend that she has not receieved?

Another issue is that if notice by email is accepted as valid by CLB, this person does not have the email id.

Do the shareholders have the power to appoint another Director without the concurrence of the board or with the concurrence of one Director?

Can the Director in question appoint a lawyer or CA as proxy to attend the EGM, if at all she receives the notice?

Would appreciate if all the queries are clarified.

My replies are marked bold.

The crux of the above issue lies in issuing notice and acknowledging it. One of my queries was what if the person refuses to take the registered post or certificate of posting and later contend that she has not receieved?

If you can prove  your having sent the notice by Registered Post or Certificate of Posting to the Director and his refusal to accept the same, then there is no problem. Ensure that the notice is sent to his registered address as appearing in the mca website. According to Section 53 of Companies Act service of notice of a meeting shall be deemed to have been effected at the expiration of 48 hours after the letter containing the same is posted and in any other case, at the time at which the letter would be delivered in the ordinary course of post.

Another issue is that if notice by email is accepted as valid by CLB, this person does not have the email id.

Service of documents by  email notice is not legally accepted so far. A document may be served by a company on any member thereof either personally or by sending it by post to him to his registered address. PERSONAL SERVICE is therefore permitted.

Do the shareholders have the power to appoint another Director without the concurrence of the board or with the concurrence of one Director?

Shareholders have the power to appoint Director.  However as stated by Satender Kumar, in this case first you remove the existing director by following the procedure specified by him and then in the same EGM, the company can appoint you as Director.

Can the Director in question appoint a lawyer or CA as proxy to attend the EGM, if at all she receives the notice

A director, if he or she is a shareholder is free to appoint anyone as his or her proxy to attend and vote at EGM.

All your queries have been clarified by Jayashree S Aiyer and I also agree with the reply.

Dear Jayashree

Thanks for your detailed explanation. I have few more queries in connection with your reply

1.  The company now is not functional and the returns needs to be filed in ROC. There are no employees in the organisation. The idea is to restart the company.

2.  By Personal Delivery of the notice, does it include courier also?

3.  Can anyone deliver the notice in person or should it be delivered only by company representative  and what sort of acknowledgement by the party is accepted? Can it be in a sheet of paper? This question is relevant since the company has no employees on its rolls.

4.  Since the Director in question is not a shareholder, I presume she cannot appoint any proxy and she should personally be present.

5.  In the event of acceptance of notice and failure to attend the meeting can the resolution be passed to remove the diirector by the share holders in absentia?

6. Can the venue of the meeting be my residence where both share holders, myself and my mother, would be present?

Would help if you could clarify these points