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Resignation of a Director from the Board of Directors of a Company with resigning Directors' consent.
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Resignation of a Director in a Company
When a Director decides to resign from their position, or if the Board of Directors deems it necessary to remove a Director, there is a formal procedure to be followed. The Director intending to resign must submit a resignation letter to the company, officially notifying their decision. Simultaneously, the resignation should be communicated to the Registrar of Companies (ROC).
Director’s notice of resignation to the company
When a Director decides to resign from a company, the process involves providing a written notice to the company. Subsequently, the Board is obligated to inform the Registrar of Companies (ROC) within 30 days using Form DIR-12. Additionally, the resigning Director has the option to send a copy of the resignation letter, along with the reasons for resignation, directly to the ROC using Form DIR-11. Below is a standard format for a Director's resignation letter:
Director’s Resignation Letter Format
[Date, Month, Year]
To,
The Chairman / Secretary
Company Name Private Limited
City, State, Pin Code
Subject: Resignation from the Office of Director of the Company Dear Sir/Madam,
I hereby tender my resignation from the office of the Director of [Company Name] with immediate effect [or mention the resignation date if it's not immediate]. Notice of my resignation letter should be submitted to the Registrar of Companies, and the Board of Directors should be informed in the next board meeting as conducted. I sincerely thank all the Board of Directors for giving me this opportunity and timely assistance to discharge my duties during my tenure as a Director of the company.
I request the Board of Directors to please provide me with an acknowledgment of the resignation and a copy of the E-form DIR-12 filed with the Registrar of Companies to that effect for my reference and record.
Thanking You,
Yours Faithfully,
[Name of the Director]
Obligation on the part of the Director who is resigning from the post
A director can resign by submitting a written notice to the company's Board of Directors, with email or a letter being acceptable modes of communication.
The resignation, along with detailed reasons, must be forwarded to the Registrar of Companies using Form DIR-11 and the prescribed fees within 30 days from the resignation date as per the Companies Rules, 2014.
Resignation becomes effective upon the company's receipt of notice or the director's specified date. The effective date aligns with the cessation date noted in form DIR12.
With DIR-11 the Director is also required to attach the following documents:
- Notice of the resignation that is filed with the Company (resignation letter can also be attached)
- Proof of Dispatch of the letter.
- If any acknowledgment that is received from the Company and is mandatory is the Director has selected Yes in Form DIR11.
- Other information can also be provided as optional attachments.
Obligations for the Company
The Board of Directors must consider the received resignation notice and pass a resolution for acceptance. Minutes of the Board of Directors' meeting need to be drafted accordingly.
In adherence to Rule 15 of the Companies Act, 2014, the Registrar should be informed via Form DIR12 within 30 days of receiving the resignation.
The resignation should be disclosed in the Director's report during the annual general meeting, and it must be reflected on the company's website.
While filing DIR1, the company is obligated to attach the following documents:
- The notice of resignation (Mandatory)
- Evidence of cessation (The board resolution or the acceptance letter can be attached)
Resignation Acceptance Letter by the company
[Date, Month, Year]
To
[Name of the Director who has resigned]
[Address] Subject: Acknowledgement of Resignation
Dear Sir,
With reference to your resignation letter dated [Date], we hereby acknowledge receipt of the same. In connection to this, the Board of Directors has duly approved your resignation effective from [Effective Date], as resolved in the Board meeting held on [Meeting Date].
The Board expresses sincere appreciation for your valuable contributions and dedication during your tenure with the company. Your efforts have been instrumental in our collective success. We extend our best wishes for your continued success and fulfillment in your future endeavors.
Thank you for your dedicated service.
Yours faithfully,
For [Company Name],
[Director's Name]
[Director's Title]
Liability of Director after Resignation:
Upon acceptance of a Director’s resignation by the Board, the Director is no longer accountable for any liabilities incurred by the company post-acceptance. However, the Director remains liable for offenses that occurred during their tenure.
Process for Removing a Director:
1. Basic Prerequisite:
– The removal process must afford the Director an opportunity to be heard, a fundamental requirement under the applicable laws.
2. Issuing Notice:
– Initiated by shareholders with a minimum voting power of 1% or those holding shares totaling not more than Rs. 5,00,000.
– A special notice, signed by all members, must be delivered to the Company at least 14 days before the resolution-passing meeting. It is invalid if not issued within three months of the meeting date.
3. Notice to Members:
– The Director, whether a member or not, should receive a copy of the notice and have the right to be heard at the meeting.
– Notice served at least seven days before the meeting and can be published in two newspapers (one English, one vernacular) and posted on the company’s website seven days before the meeting.
4. Representation in Writing:
– The Director in question can submit a written representation against the removal notice.
– The company must send this representation to all members, and if unable to do so, the Director can request a reading of the representation.
5. Appeal to the Tribunal:
– An application can be made to the tribunal by the organization or any aggrieved person if the representation is not sent to members or read out in the meeting.
– The tribunal may annul the process if it deems the Director’s use of this right to be for unnecessary publicity or defamation.
– The tribunal can also order the Director to cover the application costs borne by the company.
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Unregistered type of business entity managed by one single person | A formal agreement between two or more parties to manage and operate a business | A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. | Registered type of entity with limited liability to the owners and shareholders |
| Ownership | Sole Ownership | Min 2 Partners Max 50 Partners | Designated Partners | Min 2 Shareholders Max 15 Directors Max 200 Shareholders 1 Director 1 Nominee Director |
| Registration Time | 7-9 working days | |||
| Promoter Liability | Unlimited Liability | Limited Liability | ||
| Documentation | Partnership Deed | LLP Deed Incorporation Certificate | ||
| Governance | – | Under Partnership Act | LLP Act, 2008 | Under Companies Act,2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | |
| Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs | ITR 5 | ||
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