FAQs on Director’s Resignation from Companies in India

19 April 2022 • B. Samrish

Recommended

FAQs on Director’s Resignation from Companies in India

19 April 2022 • B. Samrish

Compiled by Gyanendu & Muskan

Our article on Director’s Resignation is one of our most popular blogs, probably because it is a small write-up that clearly states the fundamentals revolving around the subject of Director’s resignation. We have been receiving numerous queries over past many years and many of the questions revolved around compliances, liabilities and consequences. The queries were researched, discussed and diligently replied by our team at B. Samrish & Co. and it can be viewed below our blog on Director’s Resignation under Companies Act, 2013. We felt the need to republish some of the selected queries separately which we thought would be interesting for the readers. While doing so, we included some questions which were raised time and again, probably because there were no direct answers. We collated these queries, organised them and further refined for ease of understanding. These have been reproduced here in the format of FAQs.

Familiarity with form DIN (Directors Identification No.), DIR 11, DIR 12 and DIR-3 KYC would be helpful. Resignation related forms are DIR 11 and DIR 12. Form DIR 11 is the liability of the Director, and Form DIR 12 is the liability of the Company. DIR-3 KYC is KYC form for Director. Every individual who holds a DIN is mandatorily required to file DIR-3 KYC. The filing of Form DIR-3 KYC is Director-specific annual compliance,

Here are the questions and some related aspects around them.

1. I am a director of a company and wish to resign but unable to file DIR-11 as my DIN has been deactivated. I have not filed my DIR 3 KYC. How can I resign? What are my options?

Please be apprised that pursuant to Rule 12A of the Companies (Appointment and Qualifications of Directors) Rules, 2014, every individual who holds a DIN as on 31st March of a financial year, is mandatorily required to file DIR-3 KYC on or before 30th September of immediate next financial year. The filing of Form DIR-3 KYC is Director-specific annual compliance, therefore it needs to be filed by every individual who is having DIN irrespective of his/her association with any of the companies as a Director. In case of filing of Form DIR-3 KYC after the due date, an individual shall have to pay the applicable additional fees of INR 5000/-.

Further, under the provision of Section 168 (1) of the Companies Act, 2013 read with Rule 15 of the Companies (Appointment and Qualification of Directors) Rules 2014, where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in e-Form DIR-11 along with the fee. It is pertinent to note that one should hold a valid DIN with “Approved” status to file any form with the Ministry.

Thus, in your case, you can intimate the Ministry about your resignation from the Company via the filing of Form DIR-11 after activating your DIN.

2. A director filed DIR-11 pending the filing of DIR-12 by the company on account of a dispute. However, he filed the form with wrong details of his date of appointment and his status. How to rectify the situation so that the mention of his resignation appears in the MCA database?

Pursuant to the provisions of Section 168 of the Companies Act, 2013, where a director intends to resign from the office of a director, he shall send a notice to the company and may file e form DIR-11 with the ROC within 30 days from the date of tendering his resignation. The Company shall within 30 days of receipt of notice of resignation file the Form DIR 12 with the Ministry.

Therefore, Form DIR 11 is the liability of the Director, and Form DIR 12 is the liability of the Company. Incorrect details filed with the Ministry in DIR 11 cannot be rectified. However, the Company must ensure that the details mentioned while filing DIR 12 are correct.

3. I want to resign as a director of a company. The present status of the company is inactive. So, will there be any problem with filling DIR 11 for inactive status?

We need to identify first the reason for the inactive status of the company to determine whether there is any problem with the filing of e-form DIR-11; for example:

If the Company Status (for filing) on MCA is “Not available for e-filing” then the DIR-11 couldn’t be filed, and

If the Company’s present filing status (defaulting in filing its statutory returns for the last two years) is “Inactive” then form DIR-11 can be filed.

4. I need to file DIR-11 but as my director is disqualified his DIN is deactivated and hence cannot file DIR-11. What to do in this case?

Since the Director is disqualified, his office as Director is automatically vacated in all the companies where he is Director pursuant to Section 167 of the Companies Act, 2013. Thus, the filing of DIR-11 is not required.

5. One of the directors after being the Director in the Company shifted to Canada and there was no communication via email or phone, and the Indian registered address is vacated and leased to others. The company tried to figure out the contact details but failed to do so. In this case, can we file DIR-12 under section 167(1)(b), if yes what are the subsequent documents to be attached other than normal documents?

Pursuant to the provisions of Section 167(1)(b) of the Companies Act, 2013, the office of the director shall become vacant in case if he absents himself from all the board meetings held during a period of twelve months with or without seeking a leave of absence.

Further, such change in the office of the Director is required to be intimated to the Registrar under the provision of section 170 read with rule 18 of the Companies (Appointment and Qualifications of Directors) Rules, 2014 via the filing of Form DIR-12. A copy of board resolution approving such vacation, copy of attendance register, copy of minutes of the board meetings, and all the correspondences which the company made to get in touch with the Director may be attached to the Form as evidence of cessation.

Also, the provisions of the minimum composition of the BOD need to be taken care of for conducting the Board meeting of the Company.

6. In a Private company, there are 4 directors i.e. A, B, C & D., and 2 members namely A & E (A is a director as well as a member of the company) both members are holding 50-50% of the share. The company wants to remove the directors A & B but both the directors are not ready to resign. Proof of notice sent is not available. What options are available?

The company has the authority to remove a Director by passing an Ordinary Resolution, given the Director was not appointed by the Central Government or the Tribunal. Thus, obtaining shareholders’ approval is a pre-requisite for the removal of director by the Board.

As per Section 167 of the Companies Act, 2013 if a Director does not attend a Board Meeting for 12 months, starting from the day on which he was absent at the first board meeting even after giving due notice for all the meetings, it will be deemed that he has vacated the office and a Form DIR – 12 will be filed on his name and his name will be removed from the Ministry of Corporate Affairs.

7. In a private limited there are 3 directors out of whom 1 director is not able to take part in the activities of the company as he is on bed rest. So the board of directors has decided to resign (remove) him. Also, his DSC has expired and his DIR-3 E KYC has not been filed. What should the Board of Directors do to resign him from the company without giving him further pain?

Resignation is a voluntary action. Board may only take steps to remove him. The board may follow the procedure of removal of a director under Section 169. It is suggested to obtain the services of a professional in this matter.

8. We have a private company with 2 directors each having 50% shares. I am a resident Indian and the other director is an NRI. Now the other director is not contributing any business revenues and since he is abroad he is not involved in any day-to-day operations or any business decision. How can I remove the Director.? Also, can I start a new company and do business in that without informing him and resigning from the existing company?

(a) Removal of Director:- As per Section 169 of Companies Act, 2013 Company can remove a director in the General Meeting through Ordinary Resolution before the expiry of the period of his office after giving him a reasonable opportunity of being heard and a new director to be appointed in place of the removed director. Besides this Articles of association can also outline several circumstances under which a director can be removed or deemed to be removed.

(b) Start a new Company:- Once you set up a new company and become the director in that company then as per section 184 you need to disclose the change in interest at the board meeting of all the Co.’s where you are on the board, it will reflect on MCA that person having this DIN is a director in these many co.’s. If you intend to just be a promoter/shareholder in the new company then there will be no issue.

9. A Pvt Ltd. Company in which there is 2 director, one of them died in the year 2016 but till today company did not file any form related to death as well as a new appointment. What steps should be taken?

As per Rule 18 of Co’s (Appointment & Qualification of Directors) Rules, 2014, In case of any appointment/change in director, the company needs to intimate ROC by filing form DIR-12 along with the prescribed fee within 30 days of appointment/change. The company has the option to file the said Form with ROC with payment of an additional applicable filing fee.

10. We have filled DIR 11 to resign from a company in protest of wrongdoings in the company. Now Company is not filling our DIR 12. Is there any other way of filling DIR 12, So that our name is removed from the MCA database?

Your liability comes to an end on the date of resignation from the Company, i.e., from the date mentioned in DIR-11. Generally, the date mentioned in the resignation letter is the effective date of resignation. Please make sure that if there is any such condition that your resignation will not be valid unless accepted by the Board, then the Board must have accepted your resignation letter, for it to be effective. Such a condition may arise by way of Articles of Association, Employment Agreement, etc.

Further, it is the Company’s liability to file DIR-12. You are nowhere liable.

11. There were 5 directors in a Producer Company. Subsequently, 3 directors submitted their resignation letters. The company also appointed 3 new directors in their place but was unable to submit DIR 12 for removal of directors due to non-KYC. Further, the directors are not responding for DIR KYC due to a dispute. What is the best way to remove the directors?

The provisions of the producer Company are governed as per Sec 465 of the Companies Act, 2013; minimum 5 and maximum 15 directors. In the present case, the Company seems to have on ROC record 8 present Directors since the resignation of Directors will not be updated until the filling of DIR-12. Due to the non-filling of DIR-3KYC, the DIN status is de-activated; hence, we cannot file DIR-12 either. Our suggestion would be to have a word with the Directors and intimate them that since the Directors have not filed DIR-11, they can still be treated as ‘Officer in Default’ in case of any violation by the Company. In case this does not work out, then you can apply with the ROC pleading the present case and request for re-activation of their DIN to fill DIR-12.

12. In a Public Ltd Company (Limited by guarantee) if an elected Director resigns, can he be re-appointed after a period of 2 months? If yes, will he have equal powers again, and if not, then can any other director who had passed the resolutions with next higher numbers, be taken on board?

There is no restriction under the Companies Act, 2013 for the appointment of the director who earlier resigned from the Company. It shall be governed by the Article of Association of the Company. Further, the power of the Director shall also be governed by the Articles of the Company and the terms of appointment by the members.

13. The company is not accepting my resignation as Director. What shall I do?

As per sec 168(1) of Companies Act, 2013 read with rule 15 and 16 of Companies (Appointment and Qualification of Directors) Rules, 2014, a Director may resign from his office by giving a notice in writing to the company and may also forward a copy of the acknowledged resignation letter along with reasons to the Registrar within 30 days from the date of resignation in form DIR 11. Further, the company shall intimate the Registrar about such resignation in Form DIR-12 within thirty days of receipt of notice of resignation from a director.

From the above provisions, it can be inferred that the resignation of the director is not subject to acceptance by the Company. In the instant case, it is advisable to file form DIR-11 for the resignation.

14. I am a full-time director and shareholder (16% share) in a private limited company. I am resigning from the directorship of the company. What are the monetary benefits I can ask from the company when I am asked to resign from the directorship of the company?

The Company and the director shall comply with the manner in which a director shall resign under the Companies Act, 2013. The Act however does not provide for any advance payment for a resigning director. The benefits or advance salary etc. shall be based on terms of employment on which a director is appointed.

15. One Director of a Private Limited Company (having 02 directors only) resigns on 15 April and files DIR-11. The company has not appointed any new director yet. Is it possible to resign without the appointment of a new director? Also, is the director who had resigned on 15th April liable to sign the returns along with the other director for FY ending March 31?

One of the requirements of a private company is to have a minimum of 2 directors on their board. Also as per section 134 of the act, financial statements of a private company need to be signed by at least 2 directors. Now since in the given case, 1 director has resigned, it is the duty of the remaining director to appoint another director. So it is advisable to fill the vacancy first and then go ahead with the filing.

Further, it should be noted that a director who has resigned is liable for acts done during his tenure. Also, request you to go through the following article:

16. I am one of the promoter directors and shareholder (14%) in a Company, and working full time in the company. Now I want to resign from my full-time working profile. Do I need to leave/forgo my share in the Company? If the company appoints a new director will the shares of the resigning director be transferred to the new director?

At the time of resignation, you are not required to forgo your shares, being a director of a company and a shareholder of a company are two different concepts. If you resign from the directorship, you still can remain the shareholder of the company.

17. Whether oral resignation u/s 168 is valid or can the director resign by oral means?

Section 168 clearly states that the director may resign by giving a notice in writing. Therefore, oral resignation is not a valid means of resignation by a director of the Company.

18. Whether resignation can be done in a general meeting? Extracts of AGM can be filed in form DIR-12?

There is no restriction on taking note of the resignation of the director in the general meeting. However, if the terms of appointment of the director provide that resignation of director requires approval of the Board of Directors of the company, then it can be done through board meeting or RBC only.

19. Can we appoint a Director followed by accepting the resignation of one of the existing directors in the same board meeting? Will the resigning and appointee director attend the board meeting?

It is valid to appoint a director in a meeting and accept the resignation of the other director in the same meeting. You are required to do it in sequential order i.e. firstly appointment of the director and then resignation of the other director.The Director resigning from the Board may attend the Board Meeting, but the director who is appointed cannot be present in the meeting as he is not a member of the Board.

20. How can I remove my name against the director of a company which has been striked-off? Without my resignation, the company was dissolved. Does this mean I still need to fill a form to resign as a Director from the company?

Pursuant to the provisions of Sec 250 of the Companies Act, 2013 when a company is struck off, it ceases to operate as a company, and the Certificate of Incorporation issued to it is deemed to be canceled. There is no mechanism of removing the name as a director of the company which is not in existence. Further, as per Sec 248(7) the liability, if any, of a director shall continue to exist.

You may also like to read:

4 comments

  1. Regarding FAQ 15- It is mentioned that as per Section 134, the financials are required to be signed by at least 2 directors, whereas Section 134 states that it would be sufficient If Chairperson of the Company signs the financials where he is authorised to do so. So, is it required to get the financials signed by Chairperson and one more director?

    1. Dear Reader,

      Pursuant to Section 134(1) of the Companies Act, 2013, the financial statements of a company shall be signed by the Chairperson (where he is authorized) or by two directors (one of which should be MD, if any) and CEO, CFO and the Company secretary (CS) {wherever they are appointed}.
      From the aforesaid provision, we can infer that either the Chairperson or two directors shall sign the financial statements (in addition to CEO, CFO and CS).

      Thus, where the Chairperson has been specifically authorized to sign financial statements, it is not required to get it signed by one more director (assuming the company does not have CEO, CFO and CS).

  2. One of my cousin have submitted his resignation during 2013 along with DIR 11. But, the company faced several issues like repayment of deposits during 2016 . But unfortunately his name was being dragged in unnecessary issues and he has been penalised . Since he does not know what happened after 2013 i.e. 2014-15, 2015-2016 and a gap of three years the company have called him and informed that till his name not being removed in ROC. Is there any possibility to prove it ? He is having all details like resignation sent thru email and also he handed over the letter of resignation to all directors in person. Also his PF amount being stopped and also no salary he earned after his resignation. Kindly clarify. Rgds

    1. While Glancing through your queries, we don’t think this would be a right forum to analyse and answer them here.

      However, please note that director’s resignation is not subject to acceptance unless he is a MD or a WTD. We request you to seek professional advise from a Practicing Company Secretary or a Lawyer in your area. Documentary evidences shall be crucial

Leave a comment

Your email address will not be published.