Overview
Directors are the key managerial personnel who control, manage and guide the affairs of a company. They play a crucial role in decision-making, policy implementation and ensuring compliance with the law. However, over time, a company may need to change its directors due to resignation, appointment of new professionals, retirement, disqualification or strategic decisions by shareholders.
Changing directors is a legal process regulated under the Companies Act, 2013, and must be reported to the Ministry of Corporate Affairs (MCA) within prescribed timelines. Failure to comply can attract penalties for both the company and its officers.
Why Change Directors?
Companies may need to change directors for several reasons, such as:
- Resignation of an existing director due to personal or professional reasons.
- Appointment of new directors to bring in fresh expertise and management.
- Retirement by rotation (in case of public companies).
- Death or disqualification of a director under Section 164.
- Expansion of the Board to comply with statutory requirements or improve governance.
- Removal of a director due to non-performance, conflict of interest or shareholder decision.
Types of Director Changes
- Appointment of a Director – Addition of a new director to the board.
- Resignation of a Director – A director voluntarily stepping down.
- Removal of a Director – Shareholders removing a director before completion of tenure.
- Retirement and Re-appointment – Directors retiring by rotation and being re-appointed (DIR-12 may not be needed if there is no change in particulars, but many companies still file for record).
- Change in Designation – E.g., conversion from additional to regular director (if Articles permit) or appointment as Managing/Whole-time Director, which requires shareholder approval under the Act.
Process of Changing Directors
1. Appointment of a Director
- Obtain Director Identification Number (DIN) (if not already allotted).
- Obtain Digital Signature Certificate (DSC) of the new director.
- Ensure consent to act as director is given in Form DIR-2.
- Convene a Board Meeting to propose appointment and, where required, call a General Meeting.
- Pass the appropriate resolution (ordinary or special, depending on the case).
- File Form DIR-12 with MCA within 30 days of appointment.
2. Resignation of a Director
- Director will submit a written resignation letter to the company.
- Company convenes a Board Meeting to take note of resignation.
- File Form DIR-12 with MCA within 30 days.
- The resigning director may also file Form DIR-11 with MCA (not strictly mandatory now, but highly recommended for personal record).
3. Removal of a Director
- Issue a special notice to members for removal.
- Hold a General Meeting and pass an ordinary resolution.
- Provide the director an opportunity to be heard.
- File Form DIR-12 within 30 days of removal.
4. Change in Designation
- Pass the necessary Board/Shareholder Resolution.
- File Form DIR-12 with updated designation (e.g., appointment as MD/WTD).
Documents Required
- DSC of new/existing director.
- DIN of new director.
- Consent letter from the director in Form DIR-2.
- Notice and minutes of Board/General Meeting.
- Resignation letter (if applicable).
- Proof of identity and address of new director.
- Declaration of non-disqualification under Section 164.
- Certified copy of shareholder resolution (if required).
Post-Change Compliances
- Update Statutory Registers (Register of Directors and KMP).
- Update signatories in MCA portal (for filings).
- Update with Banks, Tax Authorities and other statutory bodies, if required.
- Make necessary changes in contracts, MOUs or agreements signed by the company.
- Inform stakeholders, auditors and business partners.
Fee for Director Change
- MCA filing fee for Form DIR-12 - depends on company’s nominal share capital.
- Professional charges (if hiring CS/CA/consultant), it varies.
- Additional fees/penalties - Apply for late filing.
Timeline
- Filing of DIR-12: within 30 days of appointment, resignation, removal or designation change.
- Board meeting notice: at least 7 days prior (shorter notice allowed in urgent cases).
- General meeting (if required): 21 clear days’ notice, unless consent for shorter notice is given as per the Act.
FAQs
If all directors resign, the promoters or in their absence, the government will step in to appoint temporary directors. They will stay until new directors are appointed in a shareholder meeting.
No. Someone who is insolvent, convicted for certain offences, or involved in a company that defaulted on compliance cannot be appointed as a director until the problem is resolved.
- Additional Director – Appointed by the Board; stays only till the next Annual General Meeting.
- Casual Vacancy Director – Appointed when an existing director leaves mid-term; serves the rest of that director’s term.
- Alternate Director – Appointed when a director is out of India for 3 months or more; serves until the original director returns.
Yes. Shareholders can remove a director by passing a resolution in the general meeting, after giving the director a chance to explain their side. The only exception is when the director was appointed by a tribunal.
Yes. Independent directors can be removed before their term ends if shareholders pass a resolution. If the director was reappointed for a second term, a stronger approval process (special resolution) is needed.
The company has to pay extra filing fees depending on how late the form is. The company and its officers may also face penalties for delay.
Yes. A company can appoint more than one Managing Director, as long as it follows the approval process laid down in law and its Articles of Association.
Yes. Even though the law doesn’t force you to, banks and regulators must be informed to update their records, especially for account operations and signing authority.
Yes. Directors must tell the company about any interests they have in other companies or firms when they join, every year and whenever something changes.
Yes. The Articles decide how much power the Board has to appoint certain types of directors. If the Articles don’t say anything, the company must follow the general rules under company law.
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