Directors are the key decision-makers in a company and, in many cases, they are also the owners of the business. They are tasked with the responsibility of overseeing the company's operations, whilst also ensuring that the business complies with all laws and regulations.
Occasionally, certain issues can arise between different board members, which is why it is important to know the proper procedures for removing directors in your business. While a director's removal may not be a happy topic for everyone, it is an extremely serious matter and should be dealt with properly.
There are some circumstances in which it is possible for the shareholders of a company to force the exit of a director. Whether this is an option for your company depends on the governing documentation and shareholders' agreement of the company.
A Guide to Forced Exit of Directors
First, the company's constitution or shareholders agreement will outline the process of removing a director and, if this document does not state otherwise, section 203C of the Corporations Act will apply. This procedure allows the shareholders to remove a director by an ordinary resolution, which requires over half of the shareholders to vote in favour.
Next, a shareholder must call for a general meeting of the company's shareholders to consider the removal of the director. The notice of the meeting must be sent to all the shareholders and the concerned director. This director has the right to make written representations before the meeting takes place and can be given a hearing at the meeting itself.
If the resolution is approved by a majority of the shareholders, the removed director will be deemed to have resigned from the company.
Removing a director from a private limited company
Removing a director is an extremely delicate process, particularly as it deals with their position as a director of the company but not their employment rights. Therefore, it is vital that the correct procedures are followed to avoid any potential legal claims being raised against the company or defects in the process allowing the director to claim unfair dismissal.
The removal of a director can be a difficult and emotional issue, but it is a necessary part of the corporate governance process of any company. Corporate and Employment departments provide comprehensive advice on the procedure of removing directors, discuss any associated risks, offer pragmatic solutions and assist with the preparation of corporate authorizations and settlement agreements.
Popular Posts
- Goondas cases: Expert Criminal Defense Lawyers to Defend Your Rights
- Central Administrative Tribunal (CAT): Specialized court that deals with Central Govt employment issues
- State Consumer Disputes Redressal Commissions (SCDRC)
- BCI Clarifies Scope of Work for Foreign Lawyers in India
- Attorney Registration Information in Chennai, India: What You Need to Know
There are a number of reasons why a company might need to remove a director, including:
Managing the Company effectively
A business must be managed efficiently and well. One way of doing this is to have a strong, capable board of directors. While some of these directors might disagree with other directors from time to time, the company needs to be able to trust them to ensure that the business is properly run and that the company's assets are safeguarded.
