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removal of director in a pvt ltd company

SSJ (Dir) (47 Points)

09 January 2010

I am running a private ltd company consisting of two directors including me .Shares are 50: 50 .The other director is not taking part in any day to day activities and he has not even come to the office for last six months .The cheques are to be signed by both the directors .Here he is creating problems .What can be done in such cases . It has become difficult to run the business . How can he be removed ?

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7 Replies

Amir (Learner) (4016 Points)
Replied 09 January 2010

Dear SSJ,

Ur case is not clear but Hope one of the following:-

Case 1 - Solution to Practical difficulty for signing of Cheques

The Power to sign Cheque can be delegated to 1 Director or to any other officer by passing a resolution & forwarding a copy of that to ur Bankers...

Case 2 - Removal of Director

If u have decided that u don't want to carry on with that person then law can do nothing in it since he is also holding equal no. of shares in the company...It's U who has to clear this thing with him..Ki Boss Ur attitute is not going to work anymore & it's high time that v should walk on our own roads...AND IF HE AGRRES TO THIS THEN OPYIONS 4 U

1) WINDUP THE COMPANY & START A FRESF ( BUT NOT ADVISABLE)

2) ASK HIM TO LEAVE & TRANSFER HIS SHARE FOR CONSIDERATION IN FAVOUR OF OTHER PERSON(WITH WHOM U R COMFORTABLE)

3) U RESIGNS FROM DIRECTORSHIP & TRANSFER UR SHARE IN HIS FAVOUR FOR A CONSIDERATION AND START A FRESH..

SSJ (Dir) (47 Points)
Replied 10 January 2010

Can nothing be done about his absence from office ?He has not come to office for more than six months

Amir (Learner) (4016 Points)
Replied 10 January 2010

Dear SSJ,

There is no point in making noise about his absence from the office...simply because law provides that there should be a Board Meeting in every quarter..& if u claim this that that person has not attended his duties for past six months then u r inviting troubble not only for him but for urself & the company as well..

As I stated above the decision is to be taken by u on personal grounds & not on legal grounds..

Priya Sharma (Company Secretary & Student.MBA) (998 Points)
Replied 11 January 2010

Hiiii SSJ

But before going for removal of director, make sure that you bring in another director, as yours is a private Company .

Hence in order to prevent the violation of sec252(2), you should introduce another director before removing him.

I would suggest you to speak to him and ask him to transfer his shares to the person whom you want him to transfer and then you can remove him from the Board.

Regards

Priya

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 11 January 2010

Dear SSJ,

It the second director dont even come in office since last six months, it seems that you does not hold any meeting since last since months. Its is voilation of law.

Further, if there is problem of check signing only, powers can be delegated so that cheques can be signed by any one of the directors or any other official of the Company on behalf of the company.

Further, if you want to remove him from the office of director, you have to first appoint another director then only you can remove him. Shareholding may or may not be transferred.

CS Gaurav Jain (Consultant) (63 Points)
Replied 12 January 2010

Dear Members

In my opinion SSJ solely can't change the signatories because these powers are delegated by Board. They must have passed a BR and submitted the same with thier Bankers. In such cases Bankers can't legally change signatories in absence of another BR passed in supersession of earlier resolution.

With my practical experience of such cases I would sugest SSJ to try to find some third person( may be from social circle) who can act as Arbitrator and settle your dispute.

If you take any action for removal or appointment of director without taking other director into confidence then he may charge you for oppression and mismanagment . Thus resulting in judicial proceedings and surely waste of money.

In such cases it is important to first try to settle the matter by mutual discussion, then through Mediation and if not left with no choice then CLB.

Avoid making any changes in Capital or Board Structure without following Articles and Act, as it may go against you in Law.

regards

Gaurav Jain

gaurav @ rsj.co.in