Resignation of Director under the Companies Act, 2013
When a director decides to step down or a company initiates removal, the process must follow the legal requirements under the Companies Act. It starts with a formal written notice, proper documentation, and timely filings with the Registrar of Companies. Everything can be completed online within the statutory timeline, as long as the procedure is handled with clarity and care.
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OVERVIEW
What is the Resignation of a Director from a Company?
The process of a director's resignation is when a director voluntarily decides to resign from the company's board. Section 168(1) of the Companies Act, 2013, which enables all directors to take the statutory right of resigning their post, governs this situation. Resignation, unlike removal, is a gradual process of a director's exit in their own manner and time, while the company or shareholders' decision makes removal an involuntary and sudden process.
The law allows for such cases of resignation as a director's legitimate reason, such as exploring other career paths, health issues, personal situations, or simply wanting to work in other companies. The Companies Act guarantees this procedure to be formalized by the use of certain rules to keep corporate record-keeping and regulatory transparency up to date.
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
Process of Director Resignation and Director Removal
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.
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Step 1: Formal Notice and Letter SubmissionThe resignation of a director starts when written notice is given by the respective director indicating his or her reasons for resignation. |
Step 1: Pass Board ResolutionThe first thing the Board of Directors does is to vote on a resolution to remove the director. At this board meeting, the board supports the removal and pays the repercussions of removal. |
Step 2: Board Acknowledgement and NoteTaking At the subsequent board meeting, the Board of Directors must take the resignation note officially. This is not just a procedure that is done for the sake of doing; it is a statutory requirement that will officially create a record. The board has to pass a resolution to accept the resignation of the director at that very board meeting, and this is how it will be recognized officially. |
Step 2: Special Notice RequirementThe Companies Act's Section 115 necessitates that a "special notice" be given before a board resolution for resignation of director, or in this case, a removal resolution. This special notice must be:
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Step 3: Effective Date DeterminationThe director's resignation procedure has a significant element in knowing the moment the resignation becomes effective. Per Section 168(1), the resignation is considered valid as of the later date: when the company gets the resignation notice or the date mentioned by the director in the resignation letter. |
Step 3: Notify the DirectorThe company's response to the special notice must be immediate, and a copy must be sent to the director who is about to be removed. The director is entitled to:
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Step 4: Filing Form DIR-12 with the RegistrarThe business is required by law to submit E-Form DIR-12 to the Registrar of Companies within thirty days from the day of resignation. This is a required compliance which many businesses ignore, thereby incurring heavy penalties. E-Form DIR-12 is the notification to the Ministry of Corporate Affairs, making the end of a directorship official. |
Step 4: Board Meeting to Schedule General MeetingThe Board of Directors has to meet to officially fix an Extraordinary General Meeting (EGM) for discussing the removal resolution. The board resolution instructs management to convene the EGM with the removal resolution on the agenda. |
Step 5: Director's Optional Filing of Form DIR-11The company is in the process of filing Form DIR-12, while the departing director has the right to submit E-Form DIR-11 directly to the Registrar independently. This choice of filing board makes it possible for the director to have his/her resignation documented at the ministry's level. Form DIR-11 must be submitted by the director within thirty days of resignation. |
Step 5: Shareholder Notice and MeetingFormal notices regarding the EGM have to be sent to all shareholders, giving a minimum notice period of 21 days. This notice must be unambiguous in stating that the meeting will involve the resolution for the removal of the director. |
Step 6: Website and Board Report DisclosureAll companies with their own websites are obliged to display the director's resignation information on their site. This requirement for transparency ensures that all interested parties, such as shareholders, creditors, and business partners, are informed of the changes in the composition of the company's board. |
Step 6: Shareholder VoteThe shareholders will first debate the removal resolution and vote on it during the general meeting. According to Section 169, if an ordinary resolution (which only needs a simple majority of votes cast) is passed, the director can be removed. The director whose removal is being discussed has the right to be present at the meeting and to put his or her arguments forward to the shareholders. |
Step 7: Register of Directors and KMP UpdateThe director's exit must be recorded properly in the company's internal Register of Directors and Key Managerial Personnel (KMP), which is the record that the management of companies must keep to be considered legally compliant and also to be able to prove their compliance through accurate documentation. |
Step 7: Filing Form DIR-12The directors' removal is confirmed by the passing of the removal resolution by the shareholders, after which the company is required to submit E-Form DIR-12 to the Registrar of Companies within thirty days, stating the effective date of the director's cessation and confirming the removal of the director. |
Why Choose JustStart?
Why Choose JustStart for Resignation of a Director from a Company?
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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
