Confused about Different Situations on Which Director May Leave the Company. Directors play a vital role in managing a company’s operations, compliance, and strategic decisions. However, there are several situations where a director may leave the company, either voluntarily or by legal compulsion. Understanding these circumstances helps both directors and companies ensure compliance with the Companies Act, 2013 and avoid legal disputes.
📝 1. Voluntary Resignation
A director may resign voluntarily if they wish to discontinue their association with the company.
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The director submits a resignation letter to the board.
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The board passes a resolution accepting the resignation.
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The company files Form DIR-12 with the MCA to update its records.
✅ Example: Mr. A decides to resign for personal reasons. Once his resignation is accepted and Form DIR-12 is filed, his role legally ends.
⚖️ 2. Removal by Shareholders
A director can be removed by shareholders if they lose confidence in the director’s performance or conduct.
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The board issues a special notice.
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The company passes an ordinary resolution in a general meeting.
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After approval, the company files Form DIR-12 for removal.
✅ Example: If Mr. B fails to attend meetings or violates company policies, shareholders may remove him following due legal process.
🚫 3. Disqualification Under the Companies Act, 2013
A director becomes automatically disqualified if they fall under certain legal conditions such as:
| Ground for Disqualification | Explanation |
|---|---|
| 📉 Failure to File Returns | If a director fails to file annual returns or financial statements for three consecutive years. |
| 💰 Company Default | If the company fails to repay deposits, debentures, or dividends. |
| 🧾 Conviction | If convicted of an offense and sentenced to imprisonment for more than six months. |
| 🚷 Insolvency | If declared insolvent or undischarged bankrupt. |
✅ In such cases, the director automatically vacates the office without needing to submit a resignation.
🏛️ 4. Expiry of Term or Tenure
Many directors are appointed for a specific term, especially in private or public limited companies.
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When the tenure ends, the director’s office automatically vacates, unless reappointed by the board or shareholders.
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The company should still file Form DIR-12 to reflect the change.
✅ Example: Mrs. C was appointed for three years. If not reappointed after her term ends, she ceases to hold the position.
📜 5. Death or Incapacity of the Director
In unfortunate circumstances like death or permanent incapacity, the director’s position automatically becomes vacant.
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The company must notify the ROC (Registrar of Companies) by filing Form DIR-12.
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The board can then appoint a new director to fill the vacancy.
✅ Example: In case of Mr. D’s passing, the board records the event in its minutes and files the required forms with MCA.
⚙️ 6. Disqualification Due to Non-Compliance
If a director fails to comply with mandatory requirements, such as DIN KYC filing, their DIN (Director Identification Number) may get deactivated.
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This makes them ineligible to act as a director until the issue is resolved.
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The company must appoint another director to ensure compliance.
✅ Key Takeaways
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Directors may leave a company voluntarily (resignation) or involuntarily (removal, disqualification, or expiry).
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Every change must be recorded through a board resolution and filed with MCA using Form DIR-12.
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Companies should maintain updated records to avoid penalties.
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Directors must ensure their liabilities are settled before leaving.