Companies Act Section 169 — Removal of directors
CHAPTER XI APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
Commercial / Corporate
Summary
Sub-section (1) allows a company to remove a director before their term ends by passing an ordinary resolution, but only after giving the director a reasonable chance to be heard. This does not apply to a director appointed by the Tribunal under section 242. However, an independent director who has been re-appointed for a second term under sub-section (10) of section 149 can only be removed by passing a special resolution, and they too must be given a reasonable opportunity to be heard. This sub-section also does not apply if the company has chosen to appoint at least two-thirds of its directors through proportional representation under section 163.
Sub-section (2) requires that a special notice be given for any resolution to remove a director under this section, or to appoint someone in place of a removed director, at the meeting where the removal happens.
Sub-section (3) states that once the company receives notice of a resolution to remove a director, it must immediately send a copy of that notice to the director concerned. The director, whether or not they are a member of the company, has the right to be heard on the resolution at the meeting.
Sub-section (4) deals with written representations from the director facing removal. If the director makes a written representation to the company and asks that it be notified to the members, the company must, if time allows, state in any notice of the resolution that the representation has been made, and send a copy of the representation to every member who receives the meeting notice. If the copy is not sent due to insufficient time or the company's default, the director can require that the representation be read out at the meeting, without losing their right to speak orally. However, the copy need not be sent and the representation need not be read out if the Tribunal, on application by the company or any aggrieved person, is satisfied that these rights are being abused to get needless publicity for defamatory matter. In such a case, the Tribunal may order the director to pay the company's costs in whole or in part, even if the director is not a party to the application.
Sub-section (5) says that if a director is removed and they had been appointed by the company in a general meeting or by the Board, the vacancy can be filled by appointing another director in their place at the same meeting where the removal happens, provided that special notice of the intended appointment was given under sub-section (2).
Sub-section (6) provides that a director appointed to fill the vacancy holds office only until the date up to which the removed director would have held office if they had not been removed.
Sub-section (7) states that if the vacancy is not filled under sub-section (5), it can be filled as a casual vacancy according to the provisions of this Act. However, the director who was removed cannot be re-appointed as a director by the Board of Directors.
Sub-section (8) clarifies that nothing in this section takes away any compensation or damages payable to a removed director for the termination of their appointment as per the terms of their contract or appointment, or any other appointment that ends with their directorship. It also does not reduce any other power to remove a director that exists under other provisions of this Act.
Official Text
(1) A company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard: 4[Provided that an independent director re-appointed for second term under sub-section (10) of section 149 shall be removed by the company only by passing a special resolution and after giving him a reasonable opportunity of being heard:] 5[Provided further that] nothing contained in this sub-section shall apply where the company has availed itself of the option given to it under section 163 to appoint not less than two-thirds of the total number of directors according to the principle of proportional representation.
(2) A special notice shall be required of any resolution, to remove a director under this section, or to appoint somebody in place of a director so removed, at the meeting at which he is removed.
(3) On receipt of notice of a resolution to remove a director under this section, the company shall forthwith send a copy thereof to the director concerned, and the director, whether or not he is a member of the company, shall be entitled to be heard on the resolution at the meeting.
(4) Where notice has been given of a resolution to remove a director under this section and the director concerned makes with respect thereto representation in writing to the company and requests its notification to members of the company, the company shall, if the time permits it to do so,—
(a) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and
(b) send a copy of the representation to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representation by the company), and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company’s default, the director may without prejudice to his right to be heard orally require that the representation shall be read out at the meeting:
Provided that copy of the representation need not be sent out and the representation need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secure needless publicity for defamatory matter; and the Tribunal may order the company’s costs on the application to be paid in whole or in part by the director notwithstanding that he is not a party to it.
(5) A vacancy created by the removal of a director under this section may, if he had been appointed by the company in general meeting or by the Board, be filled by the appointment of another director in his place at the meeting at which he is removed, provided special notice of the intended appointment has been given under sub-section (2).
(6) A director so appointed shall hold office till the date up to which his predecessor would have held office if he had not been removed.
(7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy in accordance with the provisions of this Act:
Provided that the director who was removed from office shall not be re-appointed as a director by the Board of Directors.
(8) Nothing in this section shall be taken—
(a) as depriving a person removed under this section of any compensation or damages payable to him in respect of the termination of his appointment as director as per the terms of contract or terms of his appointment as director, or of any other appointment terminating with that as director; or
(b) as derogating from any power to remove a director under other provisions of this Act.