When a director leaves: vacation, resignation and removal under ss.167-169

Directors leave in three ways. The office empties by operation of law (vacation), the director walks out (resignation), or the company pushes the director out (removal). Sections 167 to 169 of the Companies Act 2013 give each exit its own procedure. Confusing them is how a board ends up with a "removed" director who never legally held the office, or a "resigned" director whose exit was never recorded. This guide covers the three exits. If a resignation has been given but the Registrar was never told, see our separate note on DIR-12 non-filing.

Legal basis: Companies Act 2013, ss.167-169; rules 15 and 16, Companies (Appointment and Qualification of Directors) Rules 2014.

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What to do now

Next step. First classify the exit: which s.167(1) clause, or a written resignation notice, or a s.169 removal resolution. Every step after depends on that label.
Deadline. On resignation, the company must intimate the Registrar in Form DIR-12 within thirty days from receipt of the notice (rule 15, Companies (Appointment and Qualification of Directors) Rules 2014). The director may forward his own copy with reasons in Form DIR-11 within thirty days of resignation (s.168(1) proviso; rule 16 of the same Rules).
Consequence. A person who functions as a director knowing the office has become vacant faces a fine of not less than one lakh rupees, extendable to five lakh rupees (s.167(2)). A director who has resigned stays liable for offences that occurred during his tenure (s.168(2) proviso).

Have a CA review your facts before you act or file.

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Vacation: the office that empties itself

Section 167(1) lists eight events on which "the office of a director shall become vacant". The vacancy follows from the event itself; the section does not make it depend on a board resolution or on acceptance.

(a) he incurs any of the disqualifications specified in section 164. Where the disqualification is under s.164(2), the office becomes vacant in all the companies other than the company which is in default under that sub-section.
(b) he absents himself from all the meetings of the Board held during a period of twelve months, with or without seeking leave of absence of the Board.
(c) and (d) he acts in contravention of s.184 on contracts or arrangements in which he is interested, or fails to disclose that interest in contravention of s.184.
(e) he becomes disqualified by an order of a court or the Tribunal.
(f) he is convicted of any offence, whether involving moral turpitude or otherwise, and sentenced to imprisonment for not less than six months. For orders under (e) and (f) the proviso holds the vacancy back: not for thirty days from the date of conviction or order of disqualification; where an appeal or petition is preferred within those thirty days, until seven days after it is disposed of; and where a further appeal or petition is preferred within seven days, until that further appeal or petition is disposed of.
(g) he is removed in pursuance of the provisions of the Act.
(h) he was appointed a director by virtue of holding an office or employment in the holding, subsidiary or associate company, and ceases to hold that office or employment in that company.

Acting after the office has fallen vacant is personally expensive. Under s.167(2), a person who functions as a director even when he knows that the office has become vacant on account of the disqualifications in sub-section (1) is punishable with fine of not less than one lakh rupees, extendable to five lakh rupees.

If every director vacates under s.167(1), s.167(3) provides the fallback: "the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in the general meeting."

A private company has one more lever. Section 167(4) says it "may, by its articles, provide any other ground for the vacation of the office of a director in addition to those specified in sub-section (1)". Founder-deadlock clauses and investor-nominee triggers are drafted here, and they only work if the articles actually say so.

Resignation: notice in writing, no acceptance needed

Section 168(1) makes resignation unilateral. A director "may resign from his office by giving a notice in writing to the company", and the Board "shall on receipt of such notice take note of the same". The board notes the resignation; it does not accept or reject it. The company must also intimate the Registrar in the prescribed manner, time and form, and place the fact of the resignation in the report of directors laid in the immediately following general meeting.

When does it take effect? Section 168(2): "from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later". A future-dated notice keeps the director in office until that date. A notice with no date takes effect on receipt. The proviso keeps accountability intact: the director who has resigned remains liable even after his resignation for the offences which occurred during his tenure.

Two filings sit on the Registrar's record:

The company's intimation. Rule 15 requires the company, within thirty days from the date of receipt of notice of resignation from a director, to intimate the Registrar in Form DIR-12 and to post the information on its website, if any.
The director's own copy. Under the proviso to s.168(1), the director may also forward a copy of his resignation, with detailed reasons, to the Registrar within thirty days of resignation. Rule 16 prescribes Form DIR-11 for it, with the fee under the Companies (Registration Offices and Fees) Rules 2014. The two forms are different filings by different people, and one does not replace the other.

Where all directors resign, or vacate under s.167, s.168(3) gives the same fallback as s.167(3): the promoter, or in his absence the Central Government, appoints the required number of directors to hold office until the company appoints directors in general meeting.

Removal: ordinary resolution, special notice, right to be heard

Section 169(1) lets the company remove a director "by ordinary resolution", before the expiry of the period of his office, after giving him a reasonable opportunity of being heard. It carves out three cases:

A director appointed by the Tribunal under section 242 cannot be removed this way.
An independent director re-appointed for a second term under s.149(10) can be removed only by a special resolution, and only after a reasonable opportunity of being heard.
The section does not apply where the company has used s.163 to appoint not less than two-thirds of its directors by proportional representation.

The rest of the section is a due-process ladder.

Special notice. Section 169(2) requires special notice of the resolution to remove a director, and of any resolution to appoint somebody in his place at the same meeting. Special notice is governed by s.115 of the Act.
Copy to the director. On receipt of notice of the resolution, the company must "forthwith send a copy thereof to the director concerned", and the director, whether or not he is a member, is entitled to be heard on the resolution at the meeting (s.169(3)).
His written representation. If the director makes a representation in writing and asks for it to be notified to members, the company must, if time permits, state in the notice of the resolution that a representation was made and send a copy to every member to whom notice of the meeting is sent. If it is not sent because of insufficient time or the company's default, the director may require that the representation be read out at the meeting, without prejudice to his right to be heard orally (s.169(4)).
The Tribunal exception. The representation need not be sent out or read out if, on the application of the company or of any other aggrieved person, the Tribunal is satisfied that the rights are being abused "to secure needless publicity for defamatory matter". The Tribunal may order the company's costs on that application to be paid in whole or in part by the director, even though he is not a party to it (s.169(4) proviso).

Removal also has consequences for the seat itself.

Filling the seat at the same meeting. A vacancy created by removal may, if he had been appointed by the company in general meeting or by the Board, be filled by appointing another director at the meeting at which he is removed, provided special notice of the intended appointment has been given (s.169(5)).
Term of the replacement. The new director holds office till the date up to which his predecessor would have held office had he not been removed (s.169(6)). He inherits the remainder of the term, not a fresh one.
Otherwise a casual vacancy. If the vacancy is not filled under s.169(5), it may be filled as a casual vacancy under the Act, but "the director who was removed from office shall not be re-appointed as a director by the Board of Directors" (s.169(7) proviso).
Compensation is preserved. Section 169(8) says nothing in the section deprives the removed person of compensation or damages payable under the terms of his contract or appointment, or derogates from any other power under the Act to remove a director.

A worked scenario: removing the absentee who may already have vacated

A director last attended a board meeting in January and attends none of the board meetings held through the following January. Twelve months of total absence from Board meetings has run, so s.167(1)(b) says the office "shall become vacant". The board, not having noticed, serves special notice under s.169 and passes an ordinary resolution "removing" him in March.

On the section's wording, the office had already fallen vacant, so the removal resolution had nothing to operate on, and the replacement appointment under s.169(5) rests on a predecessor term that had already ended. The cleaner file records the s.167(1)(b) vacation by board noting, with the attendance evidence attached, and fills the seat as a casual vacancy. No hearing procedure is needed because no removal took place. Whether any Registrar filing or form is needed on a vacation should be checked against the current forms before filing; this guide does not cite one.

The reverse mistake is as common: a director who has actually resigned is treated as "removed", or the other way round. Classify first, resolve second.

How the exit file should read

A defensible exit file shows, in order:

The trigger, correctly classified: the s.167(1) clause, or the resignation notice with proof of the date of receipt, or the s.169 special notice with the hearing record.
The board noting (vacation or resignation) or the members' resolution (ordinary or special, for removal).
For resignation, the company's DIR-12 and, where the director chooses, his DIR-11.
The disclosure of the resignation in the next report of directors (s.168(1)).
The vacancy-filling appointment, with the term worked out under s.169(6) where it follows a removal.

Frequently asked questions

Does vacation need a board resolution?
No. The office "shall become vacant" on the event itself (s.167(1)). The board records it; it does not create it.

How long can a director stay away before the office falls vacant?
Absence from all the meetings of the Board held during a period of twelve months, with or without leave of absence (s.167(1)(b)).

Can the board reject a resignation?
No. The Board "shall on receipt of such notice take note of the same" (s.168(1)). The resignation takes effect on receipt or on the later date specified in the notice (s.168(2)).

Should a resigning director file anything himself?
He may forward a copy with detailed reasons within thirty days of resignation (s.168(1) proviso), in Form DIR-11 under rule 16.

What majority removes a director?
An ordinary resolution after a reasonable opportunity of being heard (s.169(1)). A second-term independent director needs a special resolution, and a Tribunal appointee under s.242 cannot be removed under this section.

Must the director's side be circulated?
His written representation must be notified to members and copied to them if time permits, otherwise read out at the meeting. Only the Tribunal can excuse this, on the defamation-abuse ground (s.169(4) and its proviso).

Can the board re-appoint a removed director?
No. The Board cannot (s.169(7) proviso); the seat goes to a casual appointment of someone else, or to the general meeting.

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