Resignation of Director under the Companies Act, 2013
A director of the company who wants to resign may send a written resignation letter and serve the necessary notice. Now the whole resignation process can be done online within 30 days of giving the notice, and there should be complete adherence to the legal provisions.
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OVERVIEW
What is the Resignation of a Director from a Company?
Generally, the appointment of directors ensures that a company has a leadership face. They are responsible for the company's success and may face consequences if the company encounters a financial crisis. However, unavoidable circumstances may arise that lead someone to resign from their position.
A director resignation letter is a formal statement that communicates the individual’s intent to step down from their role as a director of the company. The letter typically explains the reason for resignation and specifies the final working day. The individual may also need to serve a notice period to give the company time to find a replacement.
The director should submit the resignation letter to the company’s board of directors as well as the Registrar of Companies (RoC).
COMPANIES ACT 2013
Resignation of Director Under Companies Act 2013
Section 168 of the Companies Act, 2013 provides detailed procedures involved in a director resigning to ensure transparency and adherence. Any director who wants to retire should write a letter to the company, which shall be recognized and laid before the Board to be approved. The resignation is captured in the records of the Board meeting so that it is properly documented in the records of the company.
The company must notify the Registrar of Companies (ROC) within 30 days after accepting the resignation by submitting the form DIR-12. The retiring director can also file Form DIR-11 with the ROC to keep as a personal document to be used later. This twofold filing procedure allows the company and the director to meet both their statutory requirements, and thus the resignation becomes valid and in accordance with the statutes of the Companies Act, 2013.
Provision of Registration
Provisions and Applicability of Resignation of Director
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Relevant Legal Sections:
Section 168 of the Companies Act, 2013, and Rules 15 and 16 of the Companies (Appointment and Qualification of Directors) Rules, 2014, govern the resignation of a director. These regulations describe how a director should resign, document, and file the resignation.
Resignation vs. Removal:
A resignation is a voluntary act by the director whereby the director gives a written notice to the company, whilst removal is executed by the shareholders or the Board of the company due to internal governance requirements. The difference guarantees equitable reflection of the will of the director as well as the interests of the company.
Post-Resignation Rights and Liabilities:
The director is also liable for actions undertaken by him after he has submitted to office until his resignation is received and registered by the Registrar of Companies (ROC). This provides responsibility and continuity in management duties.
Documents
Documents Required for Director Resignation
Documents from the Director:
✅ Resignation Letter: This is a signed resignation letter in writing with a clear indication of the cause of resignation.
✅ Acknowledgement Proof: This is a copy of the acknowledgement of the company or the proof of dispatch of the resignation.
✅ Digital Signature Certificate (DSC): This is required to file an e-form DIR-11 with the Registrar of Companies (ROC) to ensure legal compliance.
Documents from the Company:
✅ Copy of Resignation Letter: The letter sent by the resigning director is to be retained in the company's books.
✅ Board Resolution: A certified copy of a Board resolution formally accepting the resignation of the director.
✅ Amended Company Records: Statutory registers and documents should be amended to the new directorship.
✅ Form DIR-12 Filing: This filing requires that Form DIR-12 be filled out and submitted with all the attachments needed so that the com pany can formally inform the ROC about the resignation.
Penalties
Penalty / Additional Fees for Late Filing of Forms
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Late Submission Charges
In the case of failure to file Form DIR-11 or Form DIR-12 within 30 days, extra charges apply. The Ministry of Corporate Affairs (MCA) automatically calculates these fees, depending on the number of days that have been delayed.
MCA Fee Structure
The fee structure in the MCA outlines the fee that is to be paid for each day or month of delay. The more time it takes, the more the fee charged. Thus, timely compliance is not only a way of complying with the law but also prevents needless financial losses.
Punishment of Non-Compliance
The ongoing failure to submit the necessary forms may lead to severe repercussions, including fines and penalties, prosecution, or even forbidding the director from being appointed to the board again in the future. There might also be audit and reporting issues with the company.
Importance of Timely Filing
On-time filing and regulatory openness will keep both the company and the director out of court battles. It also shows good corporate governance and assists in maintaining a clean compliance record with the MCA.
Grounds
Grounds for Removal of a Director
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✔ Constant Absence of Board Meetings:
Any director who does not attend any board meeting and has not requested leave of absence within a period of 12 months has vacated the office. This keeps the governance of the company active and accountable.
✔ Disqualification Companies Act, 2013:
Some of the reasons why directors can be disqualified under Section 164 include insolvency, conviction of an offence amounting to moral turpitude, or not filing financial statements and annual returns for 3 consecutive years.
✔ Misconduct or Fraud:
Where a director has been convicted of fraud, negligence, or breach of fiduciary duty, the board or shareholders may initiate steps to protect the interests and reputation of the company.
✔ Removal by Shareholders:
As long as the requirements of due process and notice are satisfied, shareholders have the power to remove a director by an ordinary resolution at a general meeting.
✔ Court or Tribunal Order:
To provide accountability and justice to the corporation, a court or tribunal can order the removal of a director who is found to have engaged in fraudulent acts, oppression, or mismanagement.
Difference
Difference Between Removal of Director & Resignation of Director
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Procedure
Procedure for Resignation of Director & Related Compliance
As per Section 168(1) of the Companies Act, a director wishing to resign must submit a resignation notice to the Registrar within 30 days of resignation, using Form DIR-11 along with the specified fee, as outlined in the Companies (Registration Offices and Fees) Rules, 2014.
The resignation process involves certain obligations from both the director and the company. Below is a step-by-step guide to the director resignation procedure and related compliance requirements:
Step 1: Submitting the Notice
The director must provide a written resignation notice to the company and its Board of Directors. The board will acknowledge the resignation and the resignation notice becomes effective once the final date is mentioned in the notice.
Step 2: Providing Necessary Information
As part of the director resignation process, our legal team will require the following details:
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Step 3: Sending Required Documents
To complete the director resignation compliance, submit the following documents to our team:
- Resignation notice filed with the company.
- Proof of dispatch of the notice.
- Acknowledgement confirming the company’s receipt of the resignation.
Step 4: Filing the Resignation with RoC
We will file the DIR-11 form with the Registrar of Companies (RoC) on your behalf, indicating your intent to resign from the position of director.
Step 5: Modifications or Changes
If you wish to make any modifications to the form, let us know before the final submission, and we’ll update the details accordingly.
Step 6: Collecting the SRN
Once the eForm DIR-11 is successfully submitted, we will provide you with the Service Request Number (SRN). This SRN can be used for future reference with the Ministry of Corporate Affairs (MCA).
Step 7: Saving the Payment Receipt
As the resignation process involves an online fee payment, we will ensure to save your receipt, which contains details of the paid fee for the resignation of director procedure.
Step 8: Final Acknowledgement
Once the process is completed, we will save and send you the email confirmation of the director resignation under the Companies Act 2013.
Why Choose JustStart?
Why Choose JustStart for Resignation of a Director from a Company?
JustStart is India’s largest platform of CAs, professional Chartered Accountants, Company Secretaries, management professionals, and company directors, with years of expertise and experience backing us.
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Get game-changing legal help from experts who have years of experience in their respective fields. We have served over 10,000+ incorporations with our client-centric approach.
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Locations
Resignation of Director in Other States and Cities
FAQs
LET'S CLEAR ALL THE DOUBTS!
Any company director looking to step down from their position is required to fill out Form DIR-11 and send it to the Registrar of Companies (RoC) within 30 days of resignation along with a copy of a Board Resolution and a Resignation letter.
The notice of resignation in eForm DIR-11 of Section 168 (1) of the Companies Act, 2013 is a form of intimation sent to the Registrar stating the intention to resign from the said position.
Yes. A director can resign at anytime from the office by completing the formalities in writing to the company’s Board of Directors. They can send an email as a valid mode of communication as well.
Yes. There are rules and regulations consolidated by the Indian government that must be completed by the incumbent of a post and sent to the competent authority.
- A resignation has to be free of any conditions.
- A resignation is accepted if proper arrangements for an alternative to the position of importance have been made.
Well, the applicable fee depends on the nominal share capital of a company. For example, any company with a share capital of less than 1 lakh usually pays around Rs. 300 as ROC Fees, whereas the charges increase by Rs. 100 if your company’s share capital lies between Rs. 1 lakh and Rs. 4,99,999. Plus, some companies have to pay additional fees if they are submitting the resignation after a period of 30 days of giving the resignation notice.
Upon receiving a director’s resignation, the company’s board organizes a meeting where the board members take note of the resignation and files an application to the RoC in form DIR-12 indicating the same. After updating the registrar, the board may select an alternative director.
Although the director is discharged of any liabilities and responsibilities after resigning from a company, as per rules laid down by the MCA, a director may be held responsible for the wrongs done during the tenure of that particular director.
JustStart guarantees you the best affordable package detailed in the resignation of the director by covering:
- Drafting a resolution for the resignation of a director from the company
- eForm DIR-11 submission
- Drafting of a resignation letter
