Procedure for Resignation of Director in Private Limited Company

Resignation of Director is governed by Section 168 of the Companies Act, 2013 and Companies (Appointment and Qualification of directors) Rules, 2014. A director can resign from the office of the director by giving notice in writing to the board of directors of the company. The intimation is made to the Ministry of corporate affairs by filling the return of resignation form with prescribed fees.

There can be several reasons for resigning including a dispute with the board, a bigger career opportunity, misuse of powers in handling the company’s business, suspension due to infringement or recession of nomination, etc.

In this blog, we will be discussing the process with the form filled out by the registrar.

What Is the Process of Resignation of Director Under Companies Act, 2013?

The director can resign from the board of the company by following the process given below:

1. Obligations of The Director:

·     Any director can resign from his office by giving written notice to the company. After sending the notice, the board shall take note of the same and the company must intimate the registrar in such a manner, time and form as designated.

·     The director shall also send a copy of the resignation with a detailed reason for the same to the registrar in Form DIR-11 with prescribed fees as provided, within 30 days from the date of resignation.

·     The effective date of resignation is from the date on which the notice of resignation is received by the company for carrying out the resignation of director procedure or the date which is specified by the director in the notice or the date of cessation entered in E-Form DIR-12 if filed by the company, whichever is later.

2. Obligation of the Company:

·     The Board shall take note of the receipt of the notice of resignation in the board meeting of the company. The resolution is passed by the Board of directors for accepting the resignation with the drafting of minutes of the meeting of the board of directors.

·     The board shall within 30 days from the date of receipt of notice of resignation from a director, intimate the registrar of the resignation of director Form DIR-12.

·     The board shall also place the fact of resignation in the Director’s report of the subsequent general meeting of the company and also reflect it in the website of the company.

·     The company needs to attach the following documents with filing DIR-12:

·     Notice of resignation is mandatory

·     Evidence of cessation is mandatory which can be a board resolution or acceptance letter that can be attached

·     Only after the approval by the registrar, the director will be able to successfully resign from the company. When a director resigns from the company without any approval by the registrar such resignation will be considered unlawful and unethical as well. The resignation will be held void if the approval is not given to the registrar.

Notice of Resignation of Director in Word Format

Date:

To,

The Board of Directors

(Name of the Company)

Address: __________

Subject: Resignation Letter

Dear Sir/Ma’am,

I, _________, R/o _________, due to personal and unavoidable circumstances, do hereby tender my resignation from the Directorship of the company with immediate effect. Kindly accept this letter as my resignation with immediate effect from the position of director of the company and relieve me of my duties.

Kindly acknowledge the receipt of this director’s resignation letter and arrange to submit the necessary forms to the office of the registrar of companies to that effect.

Thanking you,

Yours faithfully

Name of director: _________

DIN: ___________

What Are the Documents Required for The Resignation of Director?

The documents needed for appointment and resignation are as follows:

·        Photograph: Passport-size photo of the director

·        PAN card: Self-attested PAN of the resigning director

·        Identity and residence Proof: Aadhar card/voter ID/ Passport/ Driving license of the director

·        Digital signature certificate of the resigning director

·        Mobile number and email Id of the resigning director

·        Notice of resignation filled by the director with the company

·        Proof of dispatch

·        Acknowledgment of form.

What are the Reasons behind the resignation by the director?

There must be a minimum of two directors in a private limited company as per the Companies Act, 2013. If a company has only 2 directors and one of them wants to resign on their own, it will violate the provision of the act.

The resignation of director section 168 provided by the Companies Act, 2013. At the time of filing Form DIR-12, the resignation of one director will not be allowed.

The following are the reasons for resignation as given below:

·     Dispute with the board – When a number of director’s work commonly, a difference of opinion happens. This can result in hindering the overall performance of the company in such a position. Thus, a director may decide to take resignation.

·     More profitable career opening – A person seeks a more beneficial career opportunity by enlarging their domain and chooses that option that encourages inner enthusiasm. Therefore, he may give a resignation letter to the director when he gets better offers from other companies.

·     The Resignation of director happens when they misuse powers in the company – When a director is introduced to the illegal practices of the company then he can become a part of the same which leads to resignation. For defending himself from personal liability for such activities he chooses to resign.

·     The recession of nomination – This is appropriate to the nominee directors who primarily get appointed by the NBFC’s investors on the BOD. Once, the transaction between the company and entity is complete, the nominee director can resign anytime or leave after the removal of the nomination.

Conclusion

The Companies Act, 2013 enables a director to resign from office by passing the resignation of director resolution after giving notice in writing to the company.

When a company does not notify the resignation in Form DIR-12 within the prescribed period then the director has the facility to file Form DIR-11 to intimate the Registrar of his resignation.

The status of the director in the company will be changed to ‘Resigned’ when the company electronically files Form DIR-12 within 30 days of the resignation is effective. It shall also intimate to the members and shareholders about such resignation by stating in the Board’s report laid in the annual general meeting.