Removal of Directors

The removal of a director before the expiry of his term in the office can be done by passing an ordinary resolution in the general meeting of a company after the issuance of a special notice. However, the above process is not applicable for promotional directors or directors appointed by the government.
● A director may be removed from his office by other directors before the expiry of his term in case of any conduct of offence and in case the director is no longer found to be qualified to hold his designation and does not resign from his post voluntarily.
● The resulting vacancy may be fulfilled by the appointment of another director.
● Voluntary resignation and rotations are the most common ways for the removal of directors
● The company must issue a special notice to all the directors of the company in case of the removal of any director/s.
● A written representation from the director who is subjected to be removed concerning circumstances of his proposed removal must be issued to the company.
● However, the written representation may not be read if the company is able to convince a federal high court judge that the written representation of the director intends to create adverse publicity and/ or is defamatory in nature.
● Therefore, an abuse of the statutory rights is conferred on the director according to the Companies and Allied Matters Act.
● The removal of a director is considered to be null by the constituted court of law if a copy of the notice of removal has not been delivered to all the directors.
● By passing an ordinary resolution by a simple majority, the members of a company may remove a specific director or any number of directors.
● A person appointed as a director throughout his life can be removed by making various changes in the articles and the memorandum of association.
● A removed director cannot be deprived of compensation or damages to which he is entitled under a contract of employment.
● ‘Corporate democracy’ is a practice, according to which, a director holds substantial number of shares in a company or represents a group of shareholders.
● Considerable litigation follows a decision to remove a director from the board.
● The litigation concerned with the removal of a director becomes too much complicated to deal with if the director subjected to the removal or the group of people he represents are extremely resistant to the act of the removal of the specific director.
● Usually the issue of removal of a director is agitated in the high court or the Company Law board under section 397/398 of the Companies Act, 1956.
● Generally, many conflicts and controversies arise in the general meetings amongst groups of shareholders during the process of the removal of a director.
● A removed director may seek justice from the court of law if he perceives his removal to be on illegal grounds.