Companies Act Section 169

Companies Act - Section 169: Removal of Directors

1. Authority to Remove a Director

A company holds the authority to remove a director from office before the completion of their tenure. However, this provision does not apply to a director appointed by the Tribunal under Section 242 of the Companies Act. The removal process must be carried out through the passage of an ordinary resolution at a duly convened general meeting. The director in question must be provided with a reasonable opportunity to present their case before the company takes any final decision regarding their removal.

Special Provision for Independent Directors

If the director being considered for removal is an independent director who has been reappointed for a second term under Section 149(10), then the removal can only be effected by passing a special resolution and after giving the director a reasonable opportunity to present their case.

Proportional Representation Exception

In cases where the company has adopted the proportional representation method under Section 163 to appoint at least two-thirds of its directors, the provisions of Section 169(1) regarding director removal will not be applicable.

2. Requirement of Special Notice

A special notice is required for any resolution that proposes the removal of a director or the appointment of a replacement director at the same meeting.

3. Notification to the Director

Upon receipt of the special notice regarding the proposed removal, the company is obligated to immediately send a copy of the notice to the director concerned. The director, irrespective of whether they are a shareholder of the company, has the right to be heard at the meeting where the resolution for their removal is being considered.

4. Right of Representation

If the director whose removal is being proposed submits a written representation to the company and requests that it be circulated to all members, the company shall, provided there is sufficient time:

Mention the receipt of such representation in the notice of the resolution sent to members.
Send a copy of the representation to each member to whom the notice of the meeting is sent.
If there is insufficient time to circulate the written representation, or if the company defaults in doing so, the director has the right to request that their representation be read aloud at the meeting. However, if the Tribunal determines that such representation is being used to gain unnecessary publicity for defamatory content, it may order that the representation need not be circulated or read out. The Tribunal may also impose costs on the director if it finds that the representation was intended to cause harm or disruption.

5. Appointment of a Replacement Director

If a director is removed under this section and was originally appointed by the company in a general meeting or by the Board of Directors, the company may appoint another director in their place at the same meeting where the removal took place. However, this appointment can only be made if special notice has been given as required under sub-section (2).

6. Tenure of the Replacement Director

A director who is appointed as a replacement for a removed director shall hold office only until the date that the removed director would have held office if they had not been removed.

7. Treatment of Unfilled Vacancy

If the company does not immediately appoint a replacement director at the meeting where the removal occurs, the vacancy shall be treated as a casual vacancy and must be filled in accordance with the provisions of the Companies Act. However, under no circumstances shall the removed director be reappointed to the Board of Directors by the Board itself.

8. Protection of Director’s Rights

The provisions of Section 169 shall not be interpreted in a way that:

Deprives the removed director of any compensation or damages that they are entitled to under their service contract or employment agreement as per the terms of their appointment.
Limits the powers of the company to remove a director under any other provision of the Companies Act.