Resignation of Director under Companies Act 2013

A director may resign from his office by giving written notice to the Company, and upon receipt of such notice, the Board shall take note of it, and the Company shall notify the Registrar, as well as include the fact of such resignation in the report of directors laid before the Company’s immediately following General Meeting. We’ll discuss the Resignation of Director under Companies Act, 2013 in detail in this article.

Who is Director of a Company?

Directors are the members of the collective body and they act as the Board of Directors who is in charge of overseeing, managing and directing a company’s operations. Directors are trustees of the company’s property and money, and they also function as the company’s agents in transactions they enter into on its behalf.

A director controls and manages the company’s affairs. He/she serves in a variety of capacities inside the organization. As a result, a director serves in various capacities in a company: as an agent, an employee, an officer, and a trustee.

Necessary Requirements for the procedure of Resignation of Director under Companies Act 2013

The following are the necessary requirements for the procedure of Resignation of Director under the Companies Act, 2013:

• A director’s resignation takes effect from the day, from which the company receives the notice, or on the date stated by the director in the notice, whichever is later.
• The departed director is accountable for the offences committed during his term even after his retirement.

Manner of the Resignation of Director 

According to Section 168(1) of the Companies Act, 2013, a director may resign from his office by giving written notice to the company, and the Board shall take note of the same and the company shall notify the Registrar in such manner, within such time, and in such form, as the case may be, and shall also include the fact of such resignation in the company’s report of directors laid in the immediately following general meeting. Moreover, a director may also send a copy of his resignation, along with specific reasons for the resignation, to the Registrar within thirty days after his resignation in the manner required.

In basic terms, a director may quit by giving written notice to the company, and upon receipt of the notice of resignation, the company will notify the Registrar of Companies, following which the company will present all facts and reports at the next public meeting.

Resignation’s Effective Date

The effective date of resignation should be the most recent of the following two dates: 

• The date on which the company receives the notice; or 
• The date stated by the director in the notice.

The procedure of Resignation of Director under Companies Act 2013

The following procedure should be followed by the Director to proceed with its Resignation:

• Convene a Board of Directors Meeting [as per Section 173 and Secretarial Standard-1 (SS-1)]
  • Upon receipt of the resignation letter, the Company should send a Notice of Board Meeting to all of the Company’s Directors at their registered addresses at least 7 days before the date of the Board Meeting. A shorter notice might be granted in case of urgent business.
  • Include the Agenda, Agenda Notes, and Draft Resolution with the Notice.
  • Call a meeting of the Company’s Board of Directors to discuss the resignation letter presented by the Company’s Director.
  • To permit the Company’s CS, CFO, or any Director to submit the required Form and Return with ROC.
  • The Listed Company should notify the Stock Exchange of such resignation within 24 hours of the date of the Board Meeting and post the same on the Company’s website within two working days. [SEBI (LODR) Regulations, 2015, Regulations 30 & 46(3)].
  • Prepare and circulate Draft Minutes to all Directors for comments within 15 days following the completion of the Board Meeting, via Hand/Speed Post/Registered Post/Courier/E-mail.
• Form DIR-12 submission to ROC: Within thirty days of receiving the director’s notice of resignation, the firm must notify the ROC in Form DIR-12, together with the accompanying documents:
  • A certified authentic copy of the Board Resolution; 
  •  A notice of resignation; and 
  • Evidence of cessation.
• Making mandatory Entries in the Board of Directors’ Register: The company should include the essential information in the Register of Directors and Key Managerial Personnel.
• Submission of Application: Submit a necessary amendment Application under the Acts below:
• • Goods and Services Act; 
  • Shops and Establishment Act; 
  • Factories Act; 
  • Foreign Exchange Management Act; 
  • Inter-State Migrant Workmen Act; 
  • Private Security Agency Act; 
  • EPF; and 
  • ESI,
  • Other Labor Laws  
  • Industry Specific Laws

Opinion of Judiciary

The court held in State of Karnataka v. Pratap Chand & Ors. that the Director is only liable when he is accountable for the company’s activities and acts done with his agreement and connivance. As a result, if the directors can demonstrate the same, they can be released from personal liability. However, the provisions have been tightened.

High-profile executives on the board of Nirav Modi’s organization included Sanjay Rishi (American Express president), Gautham Mukkavilli (former Pepsi Co-executive), and Suresh Senapathy (former Wipro CFO). The majority of them chose to quit as a result of the deception. Although independent directors are seldom accountable and they do not find their involvement in day-to-day operations, the (MCA) is in the process of holding them liable, assuming that they are aware of the company’s dealings. After being identified in the CBI’s FIR, two independent directors from IDFC resigned.

Their argument was that as part-time directors, their influence in the process was restricted; nonetheless, the ex-deputy MD was detained for lending loans to bankrupt firms.

 If found guilty, the directors might be accountable even after they retire. The departure of Independent Directors might serve as a warning sign to shareholders that there has been some mismanagement or unethical behaviour. It may have an impact on the company’s investment, including Foreign Direct Investment. The board of directors is one of the factors that investors consider when deciding whether or not to invest in a company.

Endnote

The Board of Directors establishes the vision and long-term goals of the organization. This comprises both the plan for achieving the goal and the monitoring of the strategy’s implementation. Directors are responsible for ensuring that the organization complies with all applicable laws and stays financially stable.