Removal, Vacation of Office, and Remuneration of Directors

A director's tenure can end in more than one way, and the Companies Act, 2013 distinguishes carefully between removal by the shareholders and automatic vacation of office arising from the director's own conduct or circumstances.

Section 169 gives a company the power to remove a director, other than a director appointed by the Tribunal under Section 242 in a case of oppression and mismanagement, before the expiry of his term of office, by passing an ordinary resolution at a general meeting. Because removal ends a term of office the shareholders themselves conferred, the section builds in procedural safeguards: the resolution requires special notice under Section 115, the director concerned must be given a reasonable opportunity of being heard before the resolution is put to vote, and the director is entitled to make representations in writing to the company, which the company must circulate to members (subject to the Tribunal's power to dispense with circulation if satisfied the right is being misused to secure needless publicity for defamatory matter). Notably, Section 169 does not extend to a director appointed under the system of proportional representation permitted by Section 163, since removing such a director by an ordinary majority would defeat the very purpose of proportional representation, which is to protect minority shareholders' chosen representation on the Board.

Vacation of office, dealt with in Section 167, is a different and broader mechanism — the office falls vacant automatically, by operation of law, on the occurrence of specified events, without any resolution of removal being required at all. Under Section 167(1), the office of a director becomes vacant if he incurs any of the disqualifications under Section 164; if he absents himself from all the meetings of the Board held during a period of twelve months, with or without seeking leave of absence; if he acts in contravention of the provisions of Section 184 relating to disclosure of interest in contracts; if he is disqualified by an order of a court or the Tribunal; if he is convicted of an offence involving moral turpitude and sentenced to imprisonment for not less than six months; or if he is removed under Section 169. In each of these situations the vacancy arises the moment the triggering event occurs, and the company must intimate the Registrar of Companies accordingly. …