Removal of Director

Removal of Director

A Director of Company can be removed from his Office before the expiry of his term by

a) the Shareholders

b) the Central Government

c) the Company Law Board

A director can be removed from his office in any of the following three ways:

a) Removal by shareholders 169

A company (whether public or private) may, by giving a special notice and passing an ordinary resolution, remove a director before the expiry of his period of office without the proof of mismanagement, breach of trust, misfeasance or other misconduct on the part of the director. If the shareholders feel that the policies pursued by the director are not appropriate, then director can be removed. The shareholders can do so by passing an ordinary resolution in a general meeting.

b) Removal by the Central Government

The Central Government has been empowered to remove managerial personnel from office on the recommendation of the Company Law Board under the following circumstances.

(i) Where a person concerned in the conduct and management of the affairs of a company has been guilty of fraud, misfeasance, persistent negligence in carrying out his obligations.

(ii) Where the business of a company has not been conducted and managed by such a person, in accordance with sound business principles or prudent commercial practices;

(iii) Where the business of a company has been conducted and managed by such a person in a manner which is likely to cause injury or damage to the interest of the trade, industry or business.

(iv) Where the business of the company has been conducted and managed by such a person with the intent to defraud its creditors, members or any other persons.

c) Removal by the Company Law Board

If an application has been made to the Company Law Board against the oppression and mismanagement of the company’s affairs by a director, then the Company Law Board may order for the termination of the director’s tenure or set aside any agreement that has been entered into between the company and the director. Such order can effect the removal of the director from his office.