COMPANY LAW NOTES:

UNIT-3
DIRECTORS:
1.INTRODUCTION:
SCOPE: Chapter-XI of the Companies Act, 2013 lays down the legal
provisions about "Appointment and Qualifications of Directors" of the
Companies. This Chapter contains Ss. 149-172. These Sections narrate the
legal provisions about the "DIRECTORS". The legal provisions are explained
in the next topic. In this present topic, the social and jurisprudent position of
the directors is discussed.
2. DEFINITION:
Definition of the director; a company as soon as it gets the certificate of
incorporation becomes a juristic person it has its own legal entity. But has no
physical appearance. It is not seen to human eye. It can be seen in the eye of
law only. It is an artificial person. It is invisible and intangible. What it does
business perform several functions through human instruments who are called
the directors the relationship of the directors and the company is very hard to
define.
Section 2 (34) of the companies act defines director means a director
appointed to the board of the company.
3. DIRECTORS AS AGENTS:
Directors as such are not servants of the company, but are rather managers who in
some respects may be said to be-
(1) quasi-trustees or fiduciaries, and (2) agents for the company. Therefore, as a
result they owe fiduciary duties and certain duties of care to the company, i.e. the
members as abody. Lord Cranworth L.C. while disposing the case Aberdeen Riwy.
Co. vs. Blaikie Bros. (1854) explained: -The directors are a body to who is delegated
the duty of managing the general affairs of the company. A corporate body can only
act by agents, and it is of course the duty of those agents so to act as best to promote
the interests of the corporation whose affairs they are conducting. Such agents have
domes to discharge of a fiduciary nature towards their principal. And it is a rule of
universal application that no one, having such duties to discharge, shall be allowed to
enter into engagements in which he has, or can have, a personal interest conflicting,
or which possibly may conflict, with the interests of those whom he is bound to
protect."
From the last one hundred or more years, it has been recognised that directors are the
agents of the company in the eye of law. The House of Lords, in "Ferguson vs.
Wilson (1866)" said: "The company has no person; it can act only through
directors, merely the ordinary case of principal and agent."
Section 229 of the Indian Contract Act, 1872 provides that any notice given to, or
information obtained bythe agent, provided that it be given or obtained in the course of
the business transacted by him for the principal, shall as between the principal and
third parties, have the same legal consequences as if it had been given or opted by the
principal. This section is quite applicable to the company and its directors The directors are
the agent of the company they owe fiduciary duty and certain duties of care to the company.
However, the directors should not exceed the limits. He should not act beyond the
memorandum and article of association of the company. If any directors exceed the power
given to him by this MOA, AOA then he shall be held liable for breach of warranty of
authority.
DIRECTORS AS TRUSTEES:
The directors occupy a peculiar position of the company. The shareholders invest amount in
the company. The amount of the company is incurred in appropriate manner in the hands of
the directors. Therefore, all the pecuniary transactions are kept in management of the
directors in trust. Almost all the powers of directors are powers in trust, viz. to issue capital
issue; to make calls, to forfeit shares. expenses of the company, payments, etc. Therefore
they are trustees of the company. But they are not trustees of individual shareholders.
TRUSTEE DIRECTORS
1.Is the legal owner of the trust property 1. A director is not the legal owner of the
property
2. A trustee always manages the affairs of 2.A directors always manages the affairs of
the trust property with his own name the company on the name of the company
3. A trustee is not the owner of the 3. A directors always manages the affairs
beneficiary of the company on the name of the
company
4. it is purely a fiduciary relationship 4.Directors- company relationship is a
complex relationship including fiduciary
relationship

Directors have been described as trustees one of the companies monies and property second
of the powers entrusted to them they may be regarded as being in fiduciary position to the
company because the companies monies and property or not vested in them but in the
company DR liable as if they are the trustees therefore they act as regards the companies
property as if they were trustees of the company although of course the company is a legal
owner such a property must be applied for specific purposes of the company and Mis
application of it is a breach of fiduciary duty. They must Exercise their fiduciary powers for
the purposes for which they were conferred and Bonafide for the benefit of the company as
a whole.
DIRECTORS AS ORGANS:
In the beginning of the nineteenth century, it was thought that the directors should perform
for their companies only. The twentieth century brought a new idea in place of that old idea.
Now there are several social aspects, besides the economic motives of a company. Now the
directors should keep in mind several aspects, viz. labour and social problems, living
standards of the country, economic sphere, literacy, health, and other social and welfare
functions, etc. In the nineteenth century, they played a minor portion to develop a nation's
welfare. But in the twentieth century, they are playing a major portion and a chief part.
The Organic Theory explains the role of the directors in two senses. In one sense, the
directors or say companies are the important organs of a country, which cause a great
prosperous to develop a nation's wealth and health. In second sense, the Board of Directors
are the brain and the only brain of the company, which is the body and the company can and
does act only through them.
CASE LAWS:
1. According to Aberdeen Rlwy. Co vs. Blaikie Bros. (1854), "the directors are a body
to whom the job of directing the overall operations of the business is entrusted. A
corporate entity can only operate via its agents, who have a duty to act in the best
interests of the corporation whose business they are managing. Such agents have
fiduciary obligations to fulfil towards their principal. And it is a general law that no
one who has such obligations to fulfil may enter into commitments in which his or
her own interests conflict with or may potentially conflict with those of people he is
obligated to safeguard.
2. From the last one hundred or more years, it has been recognised that directors are the
agents of the company in the eye of law. The House of Lords, in "Ferguson vs.
Wilson (1866)" said: "The company has no person; it can act only through directors,
merely the ordinary case of principal and agent.
3. Allen v. hyatt ( 222)
4. Lennard’s carrying co.ltd. v. Asiatic petroleum co.ltd. ( 223 )
CONCLUSION:
Directors hold a legal obligation to act fairly and reasonably while pursuing company
objectives. They function as agents and maintain a fiduciary connection with the company,
intertwining their roles. Despite a lack of precise legal delineation, directors are accountable
under the law, especially when misusing authority. They possess distinct powers, unlike
mere agents, overseeing assets and operations. The essence of directors' identity
amalgamates characteristics of agents, trustees, and partners, yet they remain distinct. The
Companies Act of 2013 defines their responsibilities and duties explicitly.
APPOINTMENTS AND QUALIFICATION OF DIRECTORS:
INTRODUCTION:
The success of the company depends upon its proper management and administration. A
company in the eyes of law is an artificial person, it has no physical existence, it has neither
soul nor a body of its own. As such, it cannot act in its own person or a company is not able
to manage its own affairs. It must act only through human agency, although the real owners
of the company are its shareholders and it is their duty to manage the affairs of the company
but, due to the following reasons it is not possible for them to do so,
1. The number of shareholders in a company is very large and therefore it is not possible for
all the shareholders to participate in the management of a company.
2. The shareholders are scattered over a very wide areas and cannot come together for
making policies of the company.
3. It is therefore decided that the management of the company must be given to some
elected representatives of the shareholders known as the ‘ Directors’.
Appointment of Directors:
The success of the company depends upon the selection and appointment of the Board of
Directors. The companies Act 2013 has taken utmost care in this regard. It lays down several
provisions regarding the appointment and removal of directors. Every company shall have a
Board of Directors consisting of individuals as directors and shall have—(a) a minimum
number of three directors in the case of a public company, two directors in the case of a
private company, and one director in the case of a One Person Company; and (b) a
maximum of fifteen directors: Provided that a company may appoint more than fifteen
directors after passing a special resolution: Provided further that such class or classes of
companies as may be prescribed, shall have at least one woman director. Every company
shall have at least one director who has stayed in India for a total period of not less than one
hundred and eighty-two days in the previous calendar year.
The directors in a company can be appointed in the following manner:
1. First Directors [section 152(1)] :
At the time of the formation of a company the promoters of the company generally select
some prominent persons to act as the first directors of a company and also mention their
names in the company’s AOA. Where no provision is made in the articles of a company for
the appointment of the first director, the subscribers to the memorandum who are
individuals shall be deemed to be the first directors of the company until the directors are
duly appointed and in case of a One Person Company an individual being member shall be
deemed to be its first director until the director or directors are duly appointed by the
member in accordance with the provisions of this section.
2. By Annual General Meeting[section 152(2,3, 4, 5 and 6)]:
Every subsequent director shall be appointed by the company in annual general meeting. A
person appointed as a director shall not act as a director unless he gives his consent to hold
the office as director and such consent has been filed with the Registrar within thirty days of
his appointment in such manner as may be prescribed. At every annual general meeting, not
less than two-thirds of the total number of directors of a company shall, be persons whose
period of office is liable to determination by retirement of directors by rotation; and be
appointed by the company in general meeting. At the first annual general meeting of a
company held next after the date of the general meeting at which the first directors are
appointed in and at every subsequent annual general meeting, one- third of such of the
directors for the time being as are liable to retire by rotation.
3. By Board of Directors [section 152(7):
The Board of Directors are empowered to appoint the following types of directors:
a) Additional Directors: The BOD’s may appoint the additional directors from time to time.
The number of additional directors must not exceed the maximum strength fixed for
BOD’s. the additional directors shall hold
office only upto the date of next annual general meeting.
b) Casual Vacancy: Where the office of any director appointed by the company in general
meeting is vacated before the expiry of his term because of death, resignation,
disqualifications, like insolvency, insanity the directors shall appoint and will hold the office
till the end of the term
of directors in whose place he is appointed.
c) Alternate Directors: The BOD’s may appoint an alternate director to act
for the original director during his absence for a period of more than 3 months from the state.
The alternate directors can hold office either till the expiry of the term of office of the original
directors or till the date of return of the original director to the state.
4. By Third Parties:
With a view to ensuring that the loans advanced by third parties are used by the company for
the purpose for which they are advanced. Under such circumstances the articles of a
company authorise the third parties i. e., the vendors, debenture holders, banking companies,
finance corporations and creditors which have advanced loans to the company can appoint
their nominees as the directors of the company. The idea behind this appointment is that the
money advanced to the company has been utilised for same purpose for which it was
borrowed.
5. By Central Government:
The central government may appoint such number of persons as a director for the period not
exceeding 3 years. The appointment of directors is made to protect the affairs of the
company which are unfair or harmful to any members or to any public the Central
Government may appoint the directors of the company. The directors so appointed are
required to keep the Central Government inform the affairs of the company.
QUALIFICATION OF DIRECTORS:
The Companies Act 2013 does not laid down any academic, technical or
professional qualifications to become a director of a company. But usually the
Companies AOA provides for certain qualifications to become a directors of a
company, they are as follows.
1. No body corporate, association or a firm can be appointed as a director of a
company. It is essential that the director must be an individual, therefore only
individuals can become directors and nobody else.
2. Every director shall be appointed by the company in general meeting.
3. No person shall be appointed as a director of a company unless he has been
allotted the Director Identification Number.
4. Every person proposed to be appointed as a director by the company in
general meeting or otherwise, shall furnish his Director Identification Number
and a declaration that he is not disqualified to become a director under this
Act.
5. Every person proposed as a candidate for the office of a director has to sign
and file with the company his consent to act as a director if he is appointed,
within thirty days of his appointment in such manner as may be prescribed
6. Every individual intending to be appointed as director of a company shall
make an application for allotment of Director Identification Number to the
Central Government in such form and manner and along with such fees as
may be prescribed.
7. The Central Government shall, within one month from the receipt of the
application under section 153, allot a Director Identification Number to an
applicant in such manner as may be prescribed.
8. Every existing director shall, within one month of the receipt of Director
Identification Number from the Central Government, intimate his Director
Identification Number to the company or all companies wherein he is a
director.
9. Every company shall, within fifteen days of the receipt of intimation under
section 156, furnish the Director Identification Number of all its directors to
the Registrar or any other officer or authority as may be specified by the
Central Government with such fees as may be prescribed or with such
additional fees as may be prescribed within the time specified under section
403 and every such intimation shall be furnished in such form and manner as
may be prescribed.
10. If a company fails to furnish Director Identification Number before the
expiry of the period with additional fee, the company shall be punishable with
fine which shall not be less than twenty-five thousand rupees but which may
extend to one lakh rupees and every officer of the company who is in default
shall be punishable with fine which shall not be less than twenty-five
thousand rupees but which may extend to one lakh rupees.
CONCLUSION:
As we have seen earlier that directors play the role of trustees, agents, and managing partners
but they are not agents or trustees of managing partners completely. The position of directors
is a combination of all three and more than that. Directors have a fiduciary relationship with
the company as well as the shareholders. Director Identification Number is the amendment
that came in 2014 and it was further amended in 2018. Directors have the power and the Act
is suitably amended so that there are checks and balances so that the director’s office does
not become absolute. The rules that came in 2014 enforces that women as directors should
be given opportunities. Director Identification Number acts as a proof of identity so that the
rate of any crime or malpractices are reduced.
TYPES OF DIRECTORS:
INTRODUCTION:
• A director so appointed may either be executive director or non-executive director.
• An Executive Director can be either a Whole-time Director of the company, or a
Managing Director (has substantial powers of management over the affairs of the company
subject to the superintendence, direction and control of the Board). They are generally
responsible for
overseeing the administration, programs and strategic plan of the organization.
In contrast, a non-executive Director is a Director who is neither a Whole-time Director nor
a Managing Director.
Director of a board may be appointed as:
1. First Director
2. Resident Director
3. Women Director
4. Independent Director
5. Alternate Director
6. Additional Director
7. Small Shareholder Director
8. Nominee Director
9. Casual Vacancy
10. Professional Director
1.First directors:
Section 152 of the Act provides that where there is no provision made in Articles of
Association of the company for appointment of first directors
then the subscribers to the memorandum who are individuals shall be deemed to be the first
directors of the company until the directors are duly appointed.
2. Resident Director:
Section 149(3) provides that every company shall have at least one director who has stayed
in India for a total period of not less than 182 days during the financial year:
Provided that in case of a newly incorporated company the requirement under this sub-
section shall apply proportionately at the end of the financial year in which it is incorporated.
3. Women Director:
Second proviso to Section 149(1) read with Rule 3 of the Companies (Appointment and
Qualification of Directors) Rules, 2014, following class of companies must have at least one
Women Director:
(a) All Listed Companies
(a) Public companies:
• with paid up capital of Rs. 100 crore or more or
• with turnover of Rs. 300 crore or more.
4.Independent Director:
According to section 151 of the Act every listed company may have one director elected by
such small shareholders.
• “Small shareholder” means a shareholder holding shares of nominal value of not more
than TWENTY THOUSAND RUPEES or such other sum as may be prescribed.
5.Independent directors:
Section 149(4) read with Rule 4 of Companies (Appointment and Qualification of
Directors) Rules, 2014 provides following companies to have specified number of
independent directors.
1. APPLICABILITY
COMPANY MINIMUM NO.OF INDEPENDENT
DIR.
ALL LISTED PUBLIC COMPANIES At least 1/3rd of total number of
independent Directors
Any fraction contained in such 1/3rd
number shall be rounded off as one.
Other public companies At least 2 independent Directors.
• with paid up capital of `10 crore or more, Note: Once the company ceases to fulfil
or any of three conditions for 3 consecutive
• with turnover of `100 crore or more, or years then it shall not be required to comply
these provisions until such time as it meets
• with outstanding loans, debentures and any of such conditions.
deposits of `50 crore or more
However, the following classes of unlisted public company shall not be covered under
sub-rule as above
(a) a joint venture;
(b) a wholly owned subsidiary; and
(c) a dormant company as defined under section 455 of the Act.
6. Additional Director
Section 161(1) of the Companies Act, 2013, provides that the articles of a company may
confer on its Board of Directors the power to appoint any person, other than a person who
fails to get appointed as a director in a general meeting, as an additional director at any time
who shall hold office up to the date of the next annual general meeting or the last date on
which the annual general meeting should have been held, whichever is earlier.
Section 161(1) of the Act applies to all companies, whether public or private.
7.alternate directors:
Section 161(2) power to appoint an alternate director rests with the Board of Directors, if so
authorized by its articles or by a resolution passed by the company in general meeting, to
appoint a person,
• not being a person holding any alternate directorship for any other director in the company
or
• holding directorship in the same company,
to act as an alternate director for a director during his absence for a period of not less than
3 months from India.
2) The RIGHT TO APPOINT AN ALTERNATE DIRECTOR vests in the Board. The
original director or the members have no right to appoint an alternate director.
:3)
Terms of office of an alternate director:
(a) Not exceeding the term permissible to original director: An alternate director shall
not hold office for a period longer than that permissible to the director in whose place he has
been appointed.
Illustration: If the original director ceases to be a director by reason of death or vacation of
office under section 167, the alternate director shall immediately cease to hold his office.
(b) The alternate director shall vacate his office when the original director returns to India.
Automatic reappointment applies to the original director: If the term of office of an original
director expires before he returns back to India, the provision for automatic reappointment of
a director shall be applicable to the original director, and not to the alternate director.
8.Nominee directors:
Section 161(3) of the Companies Act, 2013, provides that subject to the articles of a
company, the Board may appoint any person as a director nominated by any institution in
pursuance of the provisions of any law for the time being in force or of any agreement or by
the Central Government or the State Government by virtue of its shareholding in a
Government company.
• Nominee Director shall not be deemed to be independent director as per Section 149(6).
Purpose:
• Companies, which secure financial assistance from financial institutions, banks, major
shareholders, debenture holders, etc. usually confer on their lenders, power to appoint and
terminate the appointments of their nominees on their Boards.
• They are not liable to retire by rotation and hold office at the pleasure of their nominating
agencies. They cannot be removed by the company.
9.Appoinment of directors in casual vacancy:
Section 161(4), if the office of any director appointed by the company in general meeting is
vacated before his term of office expires in the normal course, the resulting casual vacancy
may subject to articles of the company, be filled by the Board of Directors at a meeting of
the Board which shall subsequently be approved by the members in the immediate next
general meeting. The person so appointed shall hold office only upto the day upto which the
director in whose place he has been appointed.
10. Professional directors:
The term “professional director” has not been defined in the Companies Act, 2013. The
dictionary defines word “professional” as a person is related to or belonging to a profession
and competent or skilled in a particular activity.
For example, a doctor may be a professional director in a hospital company.
CONCLUSION:
SAME AS POSITION OF DIRECTORS
POWERS AND DUITES OF DIRECTORS, RENUMERATION AND REMOVAL:
INTRODUCTION:
Directors are key decision-makers of a company and as such, they are
entrusted with various responsibilities and duties under the company law.
These duties are of utmost importance for the proper functioning of a
company and to ensure that the interests of all stakeholders are protected. The
following are the key duties of directors under the company law
DUITES AND POWERS:
1. Duty to act in good faith and in the best interests of the company: Section
166 of the Companies Act, 2013, states that a director of a company shall act
in good faith to promote the objects of the company for the benefit of its
members as a whole and in the best interests of the company. This duty
requires directors to exercise their powers and duties in the best interests of
the company and not for their own personal gain or interests.
2. Duty to exercise due care, skill, and diligence: Section 166 of the
Companies Act, 2013, also mandates that a director of a company shall
exercise due care, skill, and diligence while discharging his duties. This duty
requires directors to apply their knowledge, expertise, and experience to make
informed decisions that are in the best interests of the company.
3. Duty to avoid conflicts of interest: Section 184 of the Companies Act,
2013, lays down the duty of directors to avoid situations that may result in a
conflict of interest between their personal interests and the interests of the
company. Directors must disclose their interests in any contract, arrangement,
or transaction entered into or proposed to be entered into by the company to
avoid any conflict of interest.
4. Duty to maintain confidentiality: Directors have access to sensitive
information regarding the company, its operations, and its stakeholders. As
such, they have a duty to maintain confidentiality and not disclose any
information that may harm the company’s interests.
5. Duty to prevent insider trading: Directors have a duty to prevent insider
trading in the company’s securities. They must ensure that no insider,
including themselves, trades in the securities of the company on the basis of
any unpublished price-sensitive information.
CASE LAWS:
1. Hirsche v Simons, on the eve of issuing a prospectus for additional capital,
the assets of the company were revealed used by a leading firm of surveyors,
and revised values were quoted. This brought about an increase in the market
price of the company's shares and the directors sold some of their existing
shares and got benefit from the market situation.
They were held by the House of Lords to be not accountable for this profit
and the directors exercising their powers in a normal way are not accountable
if the sensitive market is incidentally influenced creating opportunities for
helpful disposal of existing shares.
2. In Albion Steel and Wire Co v Martin, a director sold certain goods to his
company out of his stock but at the market price of the day, but even so he did
make a profit because he had got the stock earlier at lower rates. He was
required by the court to account for his profit.
3. Thomas Marshall (Exports) Ltd v Guinle
A company was importing foreign goods for resale in the UK. Its managing
director formed a new import company and solicited orders on its behalf from
UK buyers and he imported goods from those very firms with whom he had
recognized contact while acting for the company. He was restrained from this
course of conduct and it was a breach of the service contract and also of the
fiduciary duty.
CONCLUSION:
In conclusion, directors’ duties are of utmost importance for the proper
functioning of a company and to ensure that the interests of all stakeholders
are protected. The various duties of directors under the company law,
including the duty to act in good faith, exercise due care and diligence, avoid
conflicts of interest, maintain confidentiality, and prevent insider trading, are
crucial for the success of a company. Directors must fulfill their duties with
utmost sincerity and diligence to ensure that the company operates in a
transparent and efficient manner.
REMOVAL OF DIRECTORS:
INTRODUCTION:
The directors of a company are responsible for managing and operating the
business of a company. The shareholder are the owners of a company. There
are times when a company i.e the shareholders want to remove a director
because of different reasons maybe because he/she is not discharging their
duty in the right way. In this article we will discuss the procedure and things
to be kept in mind for removal of director of a company as per section 169 of
the Companies Act, 2013. As per section 169 of the Companies Act’ 2013,
The shareholders have the power to remove a director of the company by
passing an ordinary resolution. If the director to be removed is an independent
director, then a special resolution is needed to remove the director.
PROCEDURE FOR REMOVAL OF A DIRECTOR:
1. Receive a special notice under section 115 from one or more of the
shareholders for removal of director detailing the grounds/reasons for removal
of director. Notice shall be given by members holding minimum 1% of the
total voting power or shares on which an aggregate sum of not less than Rs.
5,00,000 has been paid up as on the date of the notice. (Section 115 of the
Companies Act, 2013).
2. On receipt of the required special notice, the company shall send an
intimation informing the concerned director of receiving a special notice for
his removal along with the copy of such Special Notice to the concerned
director.
3. The intimation letter shall intimate the concerned director of his right to
represent himself against the said special notice giving him an opportunity to
be heard whether in writing or otherwise.
4. If the concerned director intends to make a written representation against
the resolution for his removal, he must send the same to the directors of the
company before the notice of members’ meeting is given for convening the
EGM/AGM for passing of resolution of removal. A copy of the representation
made by the concerned director shall be circulated along with the notice of
EGM/AGM.
5. In the meantime, the board of directors need to call a Board meeting to fix
date, time and venue for Extraordinary Meeting (EGM) or annual general
meeting as the case maybe and to consider resolution for removal of director
in the board meeting.
6. At the board meeting, the directors pass a resolution for removal of director
subject to the approval of shareholders at the general meeting and to issue
notice to call a general meeting of the members at a fixed date, time and
venue detailing the resolution for removal of director to be passed by the
shareholders at such meeting.
7. The Explanatory statement to the notice of the general meeting, shall
contain the detailed grounds for removal of director, along with copy of
special notice received from a shareholder(s) and the written representation, if
any from the director to be removed.
8. The resolution to be passed at the general meeting will be an ordinary
resolution as a special business in the agenda for the Extra-ordinary General
Meeting/Annual General Meeting unless the director to be removed is an
independent director in which case a special resolution should be passed by
the shareholders in order to remove a director of the company.
9. At the EGM, the director proposed to be removed shall also be given an
opportunity of being heard if he has not sent the written representation earlier.
If the director has sent the written representation as above the director has the
right to get the representation read out in the relevant meeting. However, the
company or any other person aggrieved may apply to the Tribunal not to send
the representation and not to read it out in the meeting on the ground that the
rights conferred by this section are being wrongly used by the director.
10. If the shareholders are satisfied by the explanation and representation
made by the concerned director, they may proceed to pass the resolution for
the removal of director. 11. After the resolution for such removal is passed by
the members at the EGM/AGM, the concerned director shall be informed of
his removal and the resolution passed at the general meeting maybe filed in
form MGT-14 with the registrar, if applicable.
Reasons to Remove a director
A director can be removed for any of the following reasons:
1. If they incur any of the disqualifications specified under the Companies Act
2.If they absent themselves from board meetings over 12 months
3.If they enter into contracts or arrangements against the provisions of Section
184 of the Companies Act
4. If they are disqualified by an order of a court or tribunal
5.If they are convicted by a court of any offence and sentenced to
imprisonment for not less than six months
6.If they have not abided by the terms and protocols mentioned in the
Companies Act of 2013.
Other points to be noted in respect of removal of director:
1.The provisions of Section 173(2) (now Section 102 of Companies Act,
2013) as to the explanatory statement are not applicable in respect of the
resolution for the removal, because the company merely acting in pursuance
of a special notice received by it to move the resolution, is not a resolution
proposed by the company [Life Insurance Corporation of India v. Escorts
(1986) 59 Comp Case 548 (SL).
2. Section 169 does not apply for removal of director appointed by the
tribunal u/s 242 of the Act.
3. A vacancy caused by such removal may be filled at the same meeting
provided special noticeof the proposed appointment has also been given. The
director so appointed shall hold office till the removed director could have
held office had he not been removed. If the vacancy is not filled in, at the
meeting, it may be filled in by the Board as casual vacancy. However, the
director who has been removed shall not be appointed.
4. Representation made by the removed director shall also be filed with the
Registrar when it is not sent to the members.
5. Special Notice shall be sent to concern director at least 14 days before
passing the resolution and not more than 3 months from the date of meeting.
Lastly, care and diligence must be exercised if one wants to invoke the above
provisions to remove a director. Otherwise, it can result in unnecessary legal
battle between the parties involved.