Process of Resignation of Director: Process and compliance

A director can resign from his office by providing written notice to the board and the company. The directors of the company have to inform MCA within 30 days of such event.

The companies act have now provided directors of the company with an easy exit option which was not possible before. The process for resignation has now been made unilateral and is instrumental in case of resignation where the companies act of 95 was ambiguous.

Process of Director Resignation

Director is appointed by the shareholder of the company so that they can manage the operations of the company. The company act is clear on the duties and liabilities of directors of the company whether they are managing directors, executive directors or independent director of the company.

Steps to be taken by the Director

The directors that intend to resign from the Director position need to submit the following :

Notice in Writing

The director is under obligation to send the resignation letter in writing to the company. Once the notice is sent to the board or the shareholder of the company the directors are recommended to file Form DIR -11.

NOTE: In case the director of the company is dealing with disputed matter they have to file DIR 11 mandatorily

Oral Resignation

If the director conveys about his resignation verbally in a general meeting and the same is accepted in the same meeting, it is effective and valid.

In case of NRI or Foreign Director

Any foreign director can authorise a specified person to execute and file Form DIR-11; the director is under no obligation to sign the form himself. The authorised person selected can be company secretary or any of the resident director of the company.

Process to be followed by the company

Once the company has received a notice of resignation from the director they have to complete the following obligations:

  • The company board have to take note of the resignation filed by convening a board meeting. There is no set prescribed timeline to take note but holding a general meeting is necessary.
  • The company has to intimate the registrar of the company about the resignation through E-Form DIR-12 along with Notice of Resignation and Evidence of cessation.
NOTE: DIR-12 is to be filed within 30 days from the date resignation is recorded by the director.

Documents Required

Following Documents are Mandatory in Case of resignation of a director:

  • Notice of resignation given by the director of the company to the shareholders
  • Proof of dispatch of resignation letter; the evidence of the resignation is to be attached in Form- DIR 11. If you have personally delivered the resignation, then a receiving from the company official is enough or a printout of the E-mail sent is more than enough.
  • Acknowledgement concerning resignation is not mandatory, but if in E-form you selected to provide the acknowledgement it is necessary to attach it along the form.

Effective Date of Resignation

The resignation of the director will be effective from the date the company receives the notice of the resignation from the director of the company or if any date that is mentioned by the director in the notice.

Liability of Director after Resignation

A director of the company is liable for all the If any of the offences are incurred in the tenure of the director then he will be responsible for such offences even after his or her resignation.

Share of Director after Resignation

The shareholder agreement given to the director determines whether the director of the company will have to transfer his shares post-resignation. If the MOA and AOA of the company are silent on the matter, it is entirely upto the director.

If the director of the company decides to keep his shares after resignation, he will become a shareholder of the company post-resignation.

Resignation of Managing Director

As per the companies act 2013 the resignation of a director is also not subject to acceptance of board although as per the current practice, the directors are provided with terms of appointment where the power of the managing director is mentioned.

A whole -time director or managing director resignation must be done with a proper board meeting, and hence resignation cannot happen by way of circulation of resolution.

In case all the Directors of the Company Resign

If all the directors of the company resign at the same time the promoters of the company or in absence of promoters the central government has authority to appoint directors for the company.

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