Procedure for removal of director
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| Procedure for removal of director |
NOTE: Section 284 of the Companies Act, 1956 gives shareholders of every company the right to remove any director from his office, by ordinary resolution, not being a director appointed by the Central Government in pursuance of Section 408 of the Companies Act, 1956, before the expiry of his period of office. The right given by section 284 is the statutory right which cannot be taken away by the memorandum, articles or by any contract or any other document, and if it is sought to be taken away, such a provision will be void [see section 9]. Section 284 applies to all companies, including private companies. However, removal of a director of a private company which is in the nature of partnership, the removal might be declared as an oppressive act if the shareholders instrumental in the proposing a resolution for the removal are found to have acted in a mala fide manner. The section applies to all directors except the directors appointed by the Central Government under section 408, and the directors acting as nominees of those financial institutions which are governed by separate statutes of Parliament, and those statutes contain a provision granting immunity to their nominee directors from the removal e.g. Industrial Finance Corporation Act, Industrial Development Bank of India Act, State Financial Corporations Act, Life Insurance Corporation of India Act, etc. This Section applicable to Public as well as Private Company which are subsidiaries of Public Company. *Special Notice: There are certain resolutions, which can only be moved at a meeting only if its proposers have given a prior notice to the company in this regard. Such resolutions, are deemed as resolutions requiring special notice. The proposers should give prior notice to the company not less than 14 days before the meeting at which it is proposed to be moved. It means it can not be transacted as an additional item of business. Any omission to serve a Special Notice on the directors sought to be removed constitutes denial of their statutory right of reply and in the absence of such notice to the directors, any resolution for their removal would be violated by such omission. |
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