This article is written by Mukarram Ali, pursuing Diploma in Entrepreneurship, Administration and Business Laws, from Lawsikho. He is a Student of Teerthanker Mahaveer University, Moradabad.
A “Managing Director” is somebody who is answerable for each day operations of an entity, association, or corporate division. This place is a part of the executive management of a business who is liable for day to day management of the corporation. Managing Director can be allotted in a corporate company i.e. Limited entity etc. You might have heard about this place from many sources and must have been fascinated by the influential role a Managing Director plays. However, this position has a lot of responsibilities to ejection.
According to Section 2(54) of the Companies Act, 2013, a “Managing Director” signifies a director who, by ethicalness of the articles of a company or concurrence with the company or a goals go in its general meeting, or by its Board of Directors, is depended with significant forces of the board of the undertakings of the company and incorporates a director possessing the position of managing director, by whatever name called.
At the end of the day, the Managing Director is an individual who is depended with generous forces of the executives of the issues of the company. This position falls under the meaning of “Key Managerial Personnel” under the Companies Act, 2013.
In India, the arrangement of Managing Director in a company is done as per the arrangements under section 196 of the Companies Act, 2013.
Expulsion of Managing Director by Shareholders
A company is an artificial individual, it is overseen by the Board of Directors of the Company i.e., in connection to the company, implies the aggregate body of the directors of the company. The Board may comprise of Director including autonomous director, Managing Director, Chairman, and Whole Time Director. A Managing Director can be expelled from his post and he can keep on working as the director. There are no particular grounds given in the Companies Act, 2013 under which a Managing Director can be expelled. Consequently, the choice to expel the Managing Director vests in the investors of the company.
Capacity to evacuate a Managing Director is offered on the investors of a company, as the Managing Director is liable to the investors as it were. Investors can expel a Managing Director before the expiry of his residency, aside from for the situation where a director has been designated by a council for counteractive action of persecution and fumble under section 24 of Indian Company Act, 2013 and Section 163 for proportionate portrayal.
Section 169 of the Company Act, offer capacity to investors to expel the managing director in a general meeting by conventional goals. Anyway it tends to be removed by the Memorandum of Association and Articles of Association or some other understanding of the company.
Methodology to remove a Director
The investors of a company can evacuate any director through customary goals before the expiry of his residency, aside from any director delegated by the Tribunal for avoidance of mistreatment and fumble under Section 242 and a director designated under the standard of relative portrayal under Section 163 of the Companies Act, 2013.
The privilege to evacuate a director vests in the investors of the Company and is the lawful right of the investors. Section 169 and Chapter 7 of the Companies Act, 2013 contain the arrangements identifying with evacuation of a director before his term terminates.
1) A Special Notice according to the provisions of Section 115 of the Companies Act, 2013 of the aim to move a goals for evacuation of the director be outfitted by number of individuals to the company somewhere around 14 days before the meeting at which it is to be moved, selective of the day on which the notice is served and the day of the meeting. (Section 169).
2) The Company will, following the notice of the aim to move any such goals has been getting by it, give its individuals notice of the goals in an indistinguishable way from it pulls out of the meeting.
3) In case the company isn’t in a position to pull out to every one of the individuals, it can distribute by the method for an ad in the paper having proper dissemination at the very least 7 days before the meeting.
4) The Company must give intimation to the concerned director of the intended resolution by sending a copy of the special notice received by it, forthwith on receipt thereof. The Director shall have the right to be heard on the resolution at the meeting.
5) The Director, who is looked to be expelled, can make a portrayal recorded as a hard copy against his evacuation and demand the Company to inform it to the Company’s individuals. Further, if the director asks for the company to advise the individuals from the company his portrayal against his expulsion and the portrayal is of sensible length and it has been gotten not very late, the company must :
- Mention in the notice of the goals to be moved at the Annual General Meeting, the reality of the portrayal having been gotten; and
- Send a duplicate of the portrayal to each part alongside the notice of the meeting if the portrayal has been gotten before sending the notice of the meeting or independently if the portrayal has been gotten in the wake of sending the notice of the meeting.
6) If the portrayal couldn’t be sent to the individuals since it has gotten past the point of no return or in light of the fact that the company made default in sending it, the company must peruse out the portrayal at the Annual General Meeting, if the director expects it to do as such. Notwithstanding the abovementioned, the director can make oral portrayal at the Annual General Meeting.
7) Thereafter hold and gather a General Meeting to examine other than different issues, if any of the accompanying issue identifying with the expulsion of director; “To pass an ordinary resolution for the removal of the Director”
8) If the company is a listed company then it should file a carbon copy of the proceedings of the General meeting earlier than the Stock Exchange(s) where the securities of the entity are scheduled.
9) The company likewise to document Form DIR-12 in e-structure with the Registrar of Companies inside 30 days of passing the goals alongside confirmed genuine duplicate of Special Notice got from the investors, evidence of conveyance of Special notice to the director concerned, Notice of EGM to different investors and affirmed genuine duplicate of the goals go at EGM for expulsion of the director.
10) The Company should pay the necessary fees, as approved under the Companies (Registration Offices and Fees) Rules, 2014.
As Per section – 115 of Companies Act, 2013
- Special notice to Company
There is a criterion, who can send the notice to the Company. Just investor/s holding at least 1% of complete casting a ballot power or holding shares on which a total aggregate of at the very least Rs. 5,00,000 has been paid up as on the date of the notice, can send uncommon notice to the Company for the expulsion of a director. The equivalent ought to be marked by the concerned investor/s.
- Date of meeting
shareholders reserve the privilege to choose the date of the meeting. In any case, the unique notice will not be sent sooner than three months from the date of the meeting however something like 14 crisp mornings before the date of the meeting, at which the goals is to be moved.
On receipt of notice of goals to expel a director, the company will promptly send a duplicate thereof to the director concerned, and the director, regardless of whether he is an individual from the company, will be qualified for being heard on the goals at the meeting.
- Intimation to director
The Company shall immediately send a copy of the notice to the concerned director.
- Reasonable opportunity of being heard
The director concerned may make portrayal recorded as a hard copy to the company and demands its warning to individuals from the company. The Director may demand to send his portrayals alongside the notice to the individuals and to be heard at the meeting. Be that as it may, the rights may not be accessible, if on the application both of the Company and of whatever another individual who professes to be oppressed.
- Intimation by the company to all shareholders
1) The company shall if the time permits it to do so;
- The company will find a way to send the notice to its individuals, no less than 7 crisp mornings before the meeting. The notice must be sent in an indistinguishable way from in the event of some other general meeting of the Company; and
- Send a copy of the representation to each member of the entity to whom notice of the meeting is sent.
2) The company shall if the time not permits it to do so;
The notice will be distributed in the English language in English paper and in vernacular language in a vernacular paper, both having a wide course in the State where the enrolled office of the Company is arranged. In the meantime, the notice will likewise be posted on the site, (assuming any). In any case, it will be distributed no less than 7 crisp mornings before the meeting.
The duplicate of the portrayal need not be conveyed and the portrayal need not be perused out at the meeting if, on the application both of the company and of whatever other individuals who profess to be wrong,
The Tribunal is fulfilled that the rights given by this sub-section are being mishandled to verify unnecessary attention for the disparaging issue, and the Tribunal may arrange the company’s expenses on the application to be paid in entire or to a limited extent by the director regardless of that he isn’t involved with it.
Can a Director be eliminated by passing an ordinary resolution?
In the case “Khetan Industries Private Limited Vs. Manju Ravindra Prasad Khetan” it was held by the court that the shareholders have a right to eliminate the directors under section 284 (Corresponding of Section-169 of the Companies Act, 2013) by passing an ordinary resolution and section 284 provides an inbuilt method for the enforcement of the right and civil court has no authority to entertain the suit for elimination of director.
Also, as per a landmark judgment was given in LIC of India v Escorts Ltd. (1986) it was held that it is not essential to give reasons in the explanatory statement for the elimination of a director as desired by section 173(2) (corresponding Section-102), grounds behind this judgment given by the court was that the corporation is acting on the basis of a special notice given by the shareholder u/s 284 and it is not a resolution projected by the company.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.