Know The Rights Of Shareholders In The Removal Of Directors

MCQ SELF CHALLENGE #0085

Right Of Share Holders To Remove The Directors As Per Companies Act, 2013

Dear Professional Seniors & Friends,

Warm Greetings!

Here is the Next post of #MCQ on concept based practical professional knowledge on Right of Share Holders to remove the Directors as per Companies Act, 2013 in a unique manner to be self answered by participants. The detailed answer of these MCQs shall be posted next day for the self assessment of the participants.

Feel free to contact our tax consultant in Gurgaon if you have any question or want any guidance regarding the taxation matters.

MCQ 85.1: Mr. Pramod is named as a working director for life in the articles of association of M/S XYZ Pvt Limited which was incorporated on 1st April 1977. The Articles of the Company also provide that he cannot be removed as a member in the general meeting. Some of the members want to remove Mr Pramod by passing an ordinary resolution as per procedures laid down in Companies Act?

A) He cannot be removed for Life.

B) He can be removed if AOA is amended.

C) He can be removed by shareholders in Ordinary Resolution.

D) None of the Above.

MCQ 85.2: What if in the above question, Mr. Pramod is an alternate director?

A) He cannot be removed for Life.

B) He can be removed if ADA is amended.

C) He can be removed by shareholders in Ordinary Resolution

D) None of the Above.

Answer MCQ Self Challenge #0085

This post of MCQ is on Right of Share Holders to remove the Directors as per Companies Act, 2013.

Answer MCQ BS.1:

C) He can be Removed by shareholders in Ordinary Resolution

Answer MCQ 85.2:

C) He can be Removed by shareholders in Ordinary Resolution

Practical Analysis for MCQ 85.1 & 85.2:

• Section 169 gives a statutory right to the shareholders to remove any director before the expiry of his term by following the prescribed procedure. It applies to public Companies as well as private Companies.
  
• The provisions of Section 169 shall apply regardless of the manner of appointment of Director concerned (e; whether he is a rotational director or non-rotational director, additional director, director filling casual vacancy or alternate director or any other director.
  
• Any provisions in the article of that a director shall not be removed, violates the statutory right given to the share holders and is ultra vires the act as provided in Section 6 Section 6 stipulates that the provisions of the Act have an overriding effect on the Clauses contained in the Memorandum, articles or any other agreement, if they are not in conformity with the provisions of the Act.
  
• The Section 169 has been enacted to enable the shareholders to exercise control over the directors and therefore the shareholders have been empowered to remove the Directors. Therefore, the said permanent director can be removed from the Office.
  
• In the present case the articles of the company provide that Mr. Pramod shall be director holding omce for life and he shall not be removed by the members in general Meeting In view of the Over Riding Effect of Section 6, this clause is repugnant to section 169 and is therefore void. Accordingly, the proposed Action for Removal of Mr. X is valid subject to procedure of Compliance laid down in Section 169.

Based on the above analysis, Correct answer to MCQ 85.1: C) He can be Removed by shareholders in Ordinary Resolution and Correct answer to MCQ 85.2: C) He can be removed by shareholders in Ordinary Resolution.

(Disclaimer: The objective of the MCQ post is just to discuss the concept. It may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion: you can definitely have your own opinion)

Sincere Regards!

CA Sanjay Kaimar Agrawal

Mobile: 9810116321