Resignation of a Director

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Resignation of Directors

Section 168 of the Companies Act 2013 provides comprehensive guidelines for the resignation of directors, a provision that was absent in the Companies Act, 1956. Prior to the enactment of the Companies Act, 2013, court orders followed similar principles, but the new provision underlines the clarity of the process.

A director can resign from their position by submitting a written notice to the company. Upon receiving such notice, the Board must acknowledge it. The effective date of a director’s resignation is determined by the later of two dates: the date on which the company receives the notice or the date specified by the director in the notice.

Key Points:

  1. Effective Date of Resignation: The effective date is determined as follows:
  • The date of notice receipt by the company.
  • The date specified by the director in the notice. The later date among the two is considered as the effective date of resignation.
  1. Post-Resignation Liability: It’s important to note that, as per the proviso to Section 168(2) of the Companies Act, 2013, a resigning director remains liable for any offenses that occurred during their tenure.

Procedural Steps:

  1. Upon receiving the resignation letter, the company should convene a board meeting or pass a board resolution to acknowledge the director’s resignation. Additionally, they should authorize either the Company Secretary (CS), Chief Financial Officer (CFO), or any other director to file the necessary forms with the Registrar of Companies (ROC).
  2. For listed companies, it’s mandatory to disclose the resignation to the stock exchange within 24 hours of the board meeting. Furthermore, the company should post this information on its website within 2 working days.
  3. In cases of resignation by an independent director of a listed company, detailed reasons for the resignation should be submitted, along with confirmation from the independent director that no other material reasons exist beyond those provided. This should be done within 7 working days from the resignation date.
  4. The company is required to file an intimation with ROC using Form DIR-12 within 30 days from the receipt of the resignation notice. Attachments for Form DIR-12 should include the resignation notice, evidence of cessation, and a copy of the board resolution.
  5. While optional, directors may choose to forward a copy of their resignation with ROC using Form DIR-11, accompanied by detailed reasons.
  6. In compliance with Section 170 of the Companies Act, 2013, and Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014, the company should make necessary entries in the register of directors and key managerial personnel.

These procedures ensure transparency, accountability, and compliance with legal requirements when dealing with director resignations. It’s advisable for companies to seek legal expertise to ensure adherence to relevant regulations in such matters.