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Procedure for Resignation of Director

Background 

  • A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in Form DIR-12 and shall also place the fact of such resignation in the report of Directors laid in the immediately following general meeting by the company. [Section 168 (1) of the Companies Act, 2013] 
  • A director may also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in Form DIR-11[Section 168 (2) of the Companies Act, 2013] 

Sections/Rules/ Regulations 

  • Section 168, 172 of the Companies Act, 2013 
  • Regulation 30 and 46 of the Companies Act, 2013. 
  • Rule 15, 16, 18 of the Companies (Appointment & Qualifications of Directors) Rules, 2014 
  • Secretarial Standards-1 [Secretarial Standard for Board Meeting]

Pre-requisites & Important Points 

  • The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later. 
  • The director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure. 
  • Where all the Directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of Directors who shall hold office till the Directors are appointed by the company in general meeting. 
  • In case of resignation of an independent director of the listed entity, within seven days from the date of resignation, the following disclosures shall be made to the stock exchanges by the listed entities:
    • The letter of resignation along with detailed reasons for the resignation as given by the said director.
    • Names of listed entities in which the resigning director holds directorships, indicating the category of directorship and membership of board committees, if any.
    • The independent director shall, along with the detailed reasons, also provide a confirmation that there is no other material reasons other than those provided.
    • The confirmation as provided by the independent director above shall also be disclosed by the listed entities to the stock exchanges along with the disclosures as specified [Regulation 30 read with Schedule III Part A Clause 7B of SEBI (LODR) Regulations, 2015] 
  • In case of resignation of director other than an independent director; the letter of resignation along with detailed reasons for the resignation as given by director shall be disclosed to the stock exchanges by  the  listed  entities  within  seven  days  from  the  date  that  such resignation comes into effect [Regulation 30 read with Schedule III Part A Clause 7C of SEBI (LODR) Regulations, 2015]

Procedure 

  • Receipt of Notice of Resignation by the Company. 
  • Meeting of Board of Directors to be convenedas per Section 173 of the Companies Act, 2013 and Secretarial Standard-1:
    • On receipt of resignation letter from a Director, a Notice of the Board Meeting shall be issued to all Directors at their registered addresses by post or hand delivery or by electronic means at least 7 days before the date of the board meeting, with provision for shorter notice in case of urgent business. 
    • The notice shall include Agenda, Notes to Agenda, and Draft Resolution. 
    • Hold the Board Meeting:
      • To take note of the resignation letter received by the director.
      • To authorize a director or Company Secretary to sign and file the required forms and documents with the Registrar
    • Listed companies shall disclose the outcome of the Board Meeting to the Stock Exchange within 30 minutes of Board Meeting/24 hours of Board Meeting/ 3 hours as applicable*[Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015] and also on website of the Company within 2 working days from the date of Board meeting [Regulation 46 (3) of LODR 2015]. The listed entity may provide the exact link to the webpage of each of the recognized stock exchanges where such information has already been made available by the listed entity. 

*If the Board meeting is concluded after normal trading hours but more than 3 hours before the beginning of the normal trading hours the outcome to be disclosed within 3 hours from the closure of the board meeting.  

    • In case of resignation of director other than an independent director; the letter of resignation along with detailed reasons for the resignation as given by director shall be disclosed to the stock exchanges by  the  listed  entities  within  seven  days  from  the  date  that  such resignation comes into effect
    • In case of resignation of an independent director of the listed entity, within seven days from the date of resignation, the following disclosures shall be made to the stock exchanges by the listed entities:
      • The letter of resignation along with detailed reasons for the resignation as given by the said director.
      • Names of listed entities in which the resigning director holds directorships, indicating the category of directorship and membership of board committees, if any.
      • The independent director shall, along with the detailed reasons, also provide a confirmation that there is no other material reasons other than those provided.
      • The confirmation as provided by the independent director above shall also be disclosed by the listed entities to the stock exchanges along with the disclosures as specified
    • Draft Minutes shall be prepared and circulated within 15 days from the conclusion of the Board Meeting.  

Post Resignation Requirement 

  • The company shall within thirty days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR-12 along with certified true copy of Board resolution, Resignation Letter and post the information on its website, if any. 
  • Where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014. [Proof of dispatch and acknowledgement received from the company also to be filed along with the form]

Provided that in case a company has already filed Form DIR-12 with the Registrar under Rule 15, a foreign director of such company resigning from his office may authorise in writing a practicing chartered accountant or cost accountant in practice or company secretary in practice or any other resident director of the company to sign Form DIR-11 and file the same on his behalf intimating the reasons for the resignation. 

  • The fact of such resignation to be mentioned in the report of Directors laid in the immediately following general meeting by the company
  • Make necessary entries in the Register of Director and Key Managerial Personnel and file necessary amendments under various Acts
  • MCA notified Companies (Appointment and Qualification of Directors) Amendment Rules 2023 dated 20.01.23 as per which in Form DIR-11, professional certification is mandatory

Penalties & Punishments 

  • As per Companies Act, 2013 
    • Section 172: If a company is in default in complying with any of the provisions of this Chapter and for which no specific penalty or punishment is provided therein, the company and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees, and in case of continuing failure, with a further penalty of five hundred rupees for each day during which such failure continues, subject to a maximum of three lakh rupees in case of a company and one lakh rupees in case of an officer who is in default
  • As per SEBI (LODR) Regulations, 2015 

Regulation 

Penalties & Punishments 

30  

General penalty:  

Listed entity/any other person who contravenes any provision of the regulations shall be liable for one or more of the following penalties/actions as deemed fit by the regulator : a) action as per Securities Law, b) fine, c) suspension of trading, d)freezing of promoter/promoter group holding of designated securities, as may be applicable, in coordination with depositories, e) any other action specified by Board  

46  

Advisory/warning letter per instance of non-compliance per item₹10,000 per instance for every additional advisory/warning letter exceeding  the four advisory/ warning letters in a financial year  

 

Note: SEBI related provisions are applicable to Listed entities only.

Disclaimer: The information contained in this Article is intended solely for personal non-commercial use of the user who accepts full responsibility of its use. The information in the article is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. We make no representation or warranty of any kind, express or implied regarding the accuracy, adequacy, reliability or completeness of any information on our page/article. 

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