{"id":9933,"date":"2020-04-09T08:30:21","date_gmt":"2020-04-09T03:00:21","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=9933"},"modified":"2020-06-16T13:49:25","modified_gmt":"2020-06-16T08:19:25","slug":"how-to-change-or-replace-the-director-and-shareholder-of-company","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/how-to-change-or-replace-the-director-and-shareholder-of-company\/","title":{"rendered":"How to Change or Replace the Director and Shareholder of Company?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The foundation of a company stands on two pillars, Directors and Shareholders. The role of a Shareholder is to determine and set some company\u2019s goals that need to be accomplished by a Board of Directors. Shareholders take all the major decisions from approving the financial statements to winding up the company. Besides, it does not imply that the Director has a little role to play as they are the operational workforce who handles the daily functions. However, any negligence from Director or Shareholder\u2019s side can steep down the position of a company. Therefore, it is essential to eliminate those loopholes of the company and carry the removal or replacement of such Directors or Shareholders. This document will guide you about the procedure to remove or change any defaulted Director or Shareholder under the Companies Act, 2013.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" loading=\"lazy\" width=\"811\" height=\"367\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/04\/mode-of-director-removal-edited-infographic-.png\" alt=\"mode of director removal\" class=\"wp-image-9939\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/04\/mode-of-director-removal-edited-infographic-.png 811w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/04\/mode-of-director-removal-edited-infographic--300x136.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/04\/mode-of-director-removal-edited-infographic--768x348.png 768w\" sizes=\"(max-width: 811px) 100vw, 811px\" \/><\/figure>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a30713e3b614\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a30713e3b614\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/how-to-change-or-replace-the-director-and-shareholder-of-company\/#Procedure_to_change_a_Companys_Director\" title=\"Procedure to change a Company\u2019s Director\">Procedure to change a Company\u2019s Director<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/how-to-change-or-replace-the-director-and-shareholder-of-company\/#How_to_remove_a_Shareholder_in_Small_Companies\" title=\"How to remove a Shareholder in Small Companies?\">How to remove a Shareholder in Small Companies?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/how-to-change-or-replace-the-director-and-shareholder-of-company\/#Conclusion\" title=\"Conclusion&nbsp;\">Conclusion&nbsp;<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_to_change_a_Companys_Director\"><\/span><strong>Procedure to change a Company\u2019s Director<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There are different modes of <a rel=\"noreferrer noopener\" aria-label=\"removing a Director (opens in a new tab)\" href=\"https:\/\/swaritadvisors.com\/removal-of-director\" target=\"_blank\"><strong>removing a Director<\/strong><\/a>, so the process varies for each mode. Undertake that process, which resonates with your case.<\/p>\n\n\n\n<ol><li><strong>Self Resignation:<\/strong>\u00a0In case a Director voluntarily decides to resign from his position, then the company needs to follow steps to remove such a Director:<ol><li>Summon a Board Meeting by giving a seven days notice;\u00a0<\/li><li>Thereon, all the Directors in the Board Meeting will mutually decide whether to accept or reject the resignation of the Director;<\/li><li>Company then have to pass a resolution for accepting the resignation;<\/li><li>Once the resolution is passed, the concerned Director shall have to file form DIR-11, affix the resignation letter and submit to MCA;<\/li><li>Likewise, the company shall file form DIR-12 to intimate to the Registrar about the resignation of the Director.<\/li><li>Once the Registrar approves DIR-12, the name of the concerned Director shall be removed from the master data of the Company on the <a rel=\"noreferrer noopener\" aria-label=\"MCA portal (opens in a new tab)\" href=\"https:\/\/mca.gov.in\" target=\"_blank\"><strong>MCA portal<\/strong><\/a>.<\/li><\/ol><\/li><\/ol>\n\n\n\n<ol><li><strong>Suo-moto Removal<\/strong>:&nbsp;In this mode of removal, the company can remove the Director by passing an ordinary resolution in the General Meeting unless that the Government or Tribunal did not appoint that Director. The Suo-moto mode of Director\u2019s removal works in the following way:<ol><li>The first step is to call a Board Meeting by giving 7 days\u2019 notice to all the Directors. The special notice must inform about the removal of a Director.<\/li><li>On the Board Meeting, a resolution for the holding of an EGM (Extraordinary General Meeting) shall be passed. Moreover, the company shall pass the resolution for the removal of concerned Director as a subject to the approval of Shareholders.<\/li><li>Thereby, the Extraordinary General Meeting shall be held by providing 21 days clear notice. In EGM, the members will vote on the matter, and if a majority of members show their consent for the decision, the resolution shall be passed.<\/li><li>Prior to directly passing the resolution, the concerned Director shall be given an opportunity of being heard.&nbsp;<\/li><li>If the Director fails to justify his action, the resolution shall be passed with the same procedure of filling the forms DIR \u2013 11 &amp; DIR \u2013 12 along with attachments of ordinary resolution.<\/li><li>Once the forms are filed, the name of the concerned Director will be omitted from the Ministry of Corporate Affairs website.<\/li><\/ol><\/li><\/ol>\n\n\n\n<div class=\"shadow6\"><b>Read more articles <\/b><br><ul><li><a href=\"https:\/\/swaritadvisors.com\/learning\/writ-petition-for-removal-of-disqualification-of-directors\/\">Writ Petition for Removal of Disqualification of Directors<\/a><\/li><li><a href=\"https:\/\/swaritadvisors.com\/learning\/what-are-the-different-modes-of-removal-of-directors\/\">What are the Different Modes of Removal of Directors?<\/a><\/li><li><a href=\"https:\/\/swaritadvisors.com\/learning\/procedure-for-removal-of-disqualification-of-directors-under-section-164\/\">What is the Procedure for Removal of Disqualification of Directors under Section 164?<\/a><\/li><\/ul><\/div>\n\n\n\n<ol><li><strong>Director did not attend three consecutive Board Meeting<\/strong>: Section 167 of the Companies Act, 2013 states that if a Director didn\u2019t attend 3 Board Meetings for an entire Financial Year, then it will be considered that he\/she has abandoned the company. It shall be counted starting from the first Board Meeting in which he\/she was absent, and he\/she remains to be absent even after getting a due notice to attend the meeting. In such a case, he\/she shall be deemed to vacate the office, and the company shall file form DIR-12 to remove the Director\u2019s name.<\/li><li><strong>Removal of Director by the Central Government:<\/strong>&nbsp;The Central Government holds power to remove a Director under the following circumstances:<ol><li>The Director was found guilty of any misfeasance, fraud or default;<\/li><li>Director has carried any activity that was against the principal or policies of business;<\/li><li>Directors have made any transaction that caused injury to the trade policies of the company;<\/li><li>Director got indulged in the activities or transactions for defrauding its members\/creditors<\/li><\/ol><\/li><\/ol>\n\n\n\n<ol><li><strong>Removal of Director by the National Company Law Tribunal:<\/strong>&nbsp;with this mode of removing a Director, the company has to file an appeal to prevent any mismanagement. Upon receiving such appeal, the National Company Law Tribunal will set aside or terminate such agreement of the company in regards to its Director\u2019s removal. The removed director shall not get any compensation for his\/her lost position.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_to_remove_a_Shareholder_in_Small_Companies\"><\/span><strong>How to remove a Shareholder in Small Companies?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Generally, the terms and conditions to remove a Shareholder are prescribed in the Shareholder Agreement, but if the company does not have such agreement, then it can be done by passing a resolution. Here are the steps to remove a Shareholder:<\/p>\n\n\n\n<ul><li><strong>Step-1- <\/strong>The first and foremost step is to <strong>check the Shareholder Agreement<\/strong> formed at the inception stage of the company. It is essential to find details regarding the buyout of the shares and perceive whose approval is needed for the removal, i.e., vote of the Board of Directors or by the majority of Shareholder\u2019s vote. It usually happens through a resolution.<\/li><li><strong>Step-2- <\/strong>A resolution shall be presented either to the Board of Directors or at the next meeting, depending upon the Shareholder Agreement. There is no specific manner for the same.<\/li><li><strong>Step-3-&nbsp; <\/strong>The next step is to call a Board of Directors Meetings or summon Shareholders&nbsp;to pass the resolution of a Shareholder buyout.<\/li><li><strong>Step-<\/strong><strong>4<\/strong>&#8211; Thereon, all the members will vote for or against the resolution. Once the resolution is passed, follow the Shareholder\u2019s Agreement in the purchase of the shareholder\u2019s stock. Such type of purchase is done by the company itself, wherein the shares are converted into treasury stock, or this purchase is initiated by other shareholders who hold an interest in the corporation.<\/li><li><strong>Step-5<\/strong>-If the Shareholder\u2019s Agreement does not provide any information regarding the removal of a Shareholder; then the company needs to take legal steps as inscribed in the Companies Act, 2013 for the Removal of a Shareholder.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><div class=\"shadow4\">The process of Changing or removing the Director and Shareholder is a prolonged one. One needs to have the adequate legal knowledge to conduct the same. Therefore, it is prudent to seek the guidance of professional and reach out to a reputed firm like Swarit Advisors.<br><br>We have a team of experts who possess years of knowledge and experience. Our team can ease the removal of Directors or Shareholders for your company. All you need to do is provide your valid documents rest we will sail you through. <\/div><\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/compliance-for-limited-liability-partnership-firm\/\" target=\"_blank\" rel=\"noopener noreferrer\">Compliance for Limited Liability Partnership Firm<\/a><\/mark>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The foundation of a company stands on two pillars, Directors and Shareholders. The role of a Shareholder is to determine and set some company\u2019s goals that need to be accomplished by a Board of Directors. Shareholders take all the major decisions from approving the financial statements to winding up the company. Besides, it does not [&hellip;]<\/p>\n","protected":false},"author":10,"featured_media":9937,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[380,559],"tags":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9933"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=9933"}],"version-history":[{"count":8,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9933\/revisions"}],"predecessor-version":[{"id":11058,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/9933\/revisions\/11058"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/9937"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=9933"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=9933"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=9933"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}