Addition and Removal of Directors in the Company

The change in the directorship of a company can be done at any time as and when needed. The change includes addition and removal both. The change can be voluntary or due to the demand. The demand comes up in need of an expert on the board or because of the death or resignation of an existing director. In any such event, to display the change a company should follow the rules specified under the Companies Act.

Addition of director 

A director can be added to a company only with the approval of the shareholders in a general meeting. Hence a change in the directorship of a company can be done by calling an extraordinary general meeting or adding a director in an annual general meeting. But sometimes it is not possible to wait for an annual general meeting neither is it possible to call an extraordinary general meeting. In these conditions, a company can add an additional director in a board meeting, and later on, it can normalize such a director in the upcoming annual general meeting.

Removal of director 

A company can remove the director with a reasonable cause or a director can voluntarily resign from the company. But in both cases, the total number of directors must not be less than 2. If the company gets the resignation letter then the company shall take a record of it by passing a board resolution. The director is supposed to have resigned from the date on which the company receives the notice from the director. The company has to submit a form to MCA within 30 days of the resignation.   

Removal of Director by shareholder 

A company can remove its director before the end of the period presented to bypass a shareholder’s resolution. The company must send the notice to all the members and intimate the director about the removal. The director will have an opportunity of being heard. He may send his statement and the company may share it with the members. If the time period is less then a statement may be read in the general meeting. If members believe fit, they may remove the director by passing an ordinary resolution.  The company must submit the form to MCA for the removal of a director within 30 days from the removal.  

Director and shares held by directors 

It is considered that every director must hold shares of the company and so the new director is not added. But the fact is that it is not mandatory for every director to hold shares. Change in directorship can be done by adding a director without offering the shares. Secondly, it is also expected that if the director resigns from the company then he/she requires to surrender the shares. But it is not compulsory; such a director can remain a shareholder in a company after leaving directorship. 

Conclusion 

The company has endless existence and is independent of the change in management or the members. But it is essential to report such changes to the monitoring authorities. Hence the company should follow the procedure and submit the necessary forms.

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