Change Directors or partners in the company at ROC

Overview
Essential
Procedure
Documents
FAQs

How do you change directors in a company?

A director is designated by the board of directors (also referred to as "the board") of a company or its shareholders to oversee, control, and administer the company’s operations. A change in the status of directors could take place due to reasons such as a new appointment, resignation, removal or displacement, or the death of an individual. Any change in the details or status of the director needs to be reported to the Registrar of Companies (ROC).

Directors play various roles in an organization. Broadly speaking, a managing director provides leadership to an organization and oversees the purpose of the organization; executive directors take charge of the day-to-day workings; and independent directors are responsible for the governance of the company.

The minimum number and type of directors needed by a company depend on the nature of the company.

Minimum Number of Directors:

Public Company: Minimum number of directors: 3; Maximum number: 15 (More than 15 directors (up to 20) can be appointed by passing a special resolution in the general meeting)
Private Company: Minimum number of directors: 2; Maximum number: 15
One Person Company – Minimum number of directors: 1, Maximum number: 15
Limited Liability Partnership (LLP): Minimum number of designated partners: 2; no limit to the maximum number of partners

(Note: Designated partners in an LLP are similar to directors in a private company. (LLPs are not required to appoint directors.)

Every listed company and a public company with a turnover of more than Rs. 300 crores or a paid-up capital of Rs. 100 crores as per the latest audited financial statements are required to appoint at least one female director within a year from the convocation of the second provision of Section 149(1) of the Companies Act.

Every listed company must have independent directors on the board, at least 1/3 of the total number of directors. Every public company that fulfills these conditions—having paid up share capital of ten crore rupees or more; having turnover of one hundred crore rupees or more; or having, in aggregate, outstanding loans, debentures, and deposits exceeding fifty crore rupees—must have at least two independent directors on their board.

Change in Directorship

New Appointment: The appointment of a director takes place either to fulfill the statutory requirements of a company or to add personnel to the board of directors of a company to take charge of additional responsibilities. It could be mandatory in a situation where the statutory number of directors is reduced to a number that is below the specified minimum number of directors needed as per the company’s act. Such a situation could arise in the event of the resignation, removal, or death of an existing director.

Resignation: A director might offer to resign for personal reasons or for reasons that stimulate a feeling of mistrust by the company’s board. The director could also resign if he or she feels mistreated or dishonored by the rest of the board members.

Removal or Displacement: Under Section 169 of the Company’s Act, 2013, the shareholders or the board of directors reserve the authority to remove a director of the company. The shareholders / the board of a company can remove a director from office by passing an ordinary resolution in a general meeting after giving the director a fair opportunity to be heard, except in the case when the director has been appointed by the Central Government or the Tribunal (Section 242).

A director could be removed under any of the following circumstances:

If the director is found to be acting against the interests of the company or working to garner selfish motives,
If the director is found to be disqualified under the Companies Act or has not abided by the terms of the Companies Act, 2013
If the director is disqualified by an order of a court or tribunal
If the director enters into contracts or arrangements against the provisions of Section 184 of the Companies Act,
If the director is convicted by a court of any offense and sentenced to imprisonment for not less than six months
As per Section 167 of the Companies Act, 2013, a director is removed in the event of his or her absence from three consecutive annual board meetings. Such absence is taken cognizance of, and a notice is served to the director for each of his or her absences

Prerequisites to be appointed as a director

The individual must be above 18 years of age
No mandatory educational qualifications are underlined as basic requirements for being appointed as a director, except that the individual must be qualified as per the laws and provisions of the Companies Act, 2013
The proposed individual must also be eligible as per the relevant clauses of the AOA
The consent of the board members or shareholders of the company is mandatory
Besides Indian nationals, foreign nationals and NRIs can also be appointed as directors
It is not mandatory to subscribe to the shares of a company unless otherwise stated by the AOA of the company as a requirement for the appointment.
Must have Active DIN

Key points

The names of the individuals included in the ‘Incorporation Document’ at the time of incorporation of the LLP are partners of the LLP.
For LLPs, at least one of the designated partners needs to be an Indian resident.
The designated partners in an LLP are mandatorily required to possess a Designated Partner Identification Number (DPIN). DPIN is equivalent to the Director Identification Number (DIN), as in the case of companies. For DPIN, a class 2 digital signature needs to be acquired by the designated partners.
Designated partners are accountable for regulatory and legal compliance in addition to their liability as partners.
In an LLP, a vacancy created by the resignation of a partner or otherwise needs to be filled within 30 days. This holds true in all cases, whether with or without any agreement to this effect.
A notice needs to be served on the ROC when a person ceases to be a partner or in the case of any change in the partners’ names.
If all the partners in an LLP are body corporates, or if one or more partners in the LLP are body corporates, at least two individuals who are partners in such an LLP or nominees of the body corporates need to function as designated partners.
LLP Form 4 must be filed to give effect to the resignation, removal, or cessation of partners. Form 4 should be signed by a designated partner of the LLP and has to be accompanied by a certificate from a chartered accountant, company secretary, or cost accountant certifying that the books and records of the LLP are true and correct.

Appointment of a Director

Getting the consent of the proposed director is the first step. The consent is documented in DIR-2 along with all the necessary documents, like id and address proof, etc.
The Digital Signature Certificate (DSC) and the Director Identification Number (DIN) of the proposed director are obtained. In case a DIN is not available for the proposed director, the company is required to pass a resolution towards the same and apply for the DIN in Form DIR-3.
If the director is appointed in a general meeting of the company, the company issues a notice to all the shareholders informing them about holding an extraordinary general meeting (EGM).
The company then passes the needed resolution with the effect of the appointment of the director in the EGM.
DIR-12 is filed with the ROC within 30 days of the date of appointment of the director, along with the necessary documents.
In cases of appointment through board power, the board shall pass a resolution in effect effecting the appointment of the director in the board meeting, and DIR-12 is filed.

Steps for Removing or Displacing a Director

A notice to hold a board meeting in seven days with regard to the proposal to remove a director should be sent to all the directors and a resolution is passed for holding the general meeting.
A general meeting is convened after 21 days of the declaration regarding the proposed removal of the director, and the decision to remove is finally made with the help of voting.
At first, the director is offered an opportunity to be heard. If a decision to remove the director is made, a resolution is passed, followed by the filing of two forms (Forms MGT-14 and DIR-12 with attachments of the Resolution).
The name of the director is finally eliminated from the Ministry of Corporate Affairs (MCA) website and from other public platforms, such as the company website, etc.

Steps under Director’s Resignation

In the event that a director decides to resign, a joint resolution with the company is thereby passed to authorize the notice or letter of resignation.
The form DIR-12, which also states the reasons behind the resignation, has to be shared with the ROC within 30 days of the removal of the director (as per rule 16 of Companies Rule, 2014: Appointment and Qualification of Directors)
It is mandatory for the company to provide a notice or letter of resignation for filing the eForm DIR-12
DIR-11 is also required to be filed by the resigning director.

Change in Partners in LLP

Post-incorporation of the LLP, additional partners can be added in accordance with the terms and requirements of the LLP agreement
A 30-day’ notice is served to the partners of an LLP before an individual ceases to remain a partner
The ROC needs to be reported about all or any change in partners (by resignation, death, or otherwise)

The documents needed for the appointment or removal of a director are as follows:

Resignation of a Director:

Board meeting resolution
Notice of resignation
Self-attested PAN card
Proof of Residency: Aadhar Card, Passport, Voter ID / Driving License
Proof of dispatch and acknowledgment of the form, if received.

Removal of a Director:

Self-attested PAN card
Proof of Residency: Aadhar Card, Passport, Voter ID / Driving License
DSC of the on-going Director and Director to be eliminated/removed
Proof of dispatch and acknowledgment of form, if received.
Notice of General Meeting
Ordinary Resolution for removal of Director
File Form MGT-14
File Form DIR-12 with the following attachments:

Special Notice for the Shareholders that proposes removing the Director.
Notice of General Meeting with explanatory Statement.
Copy of ordinary Resolution passed at EGM.

Appointment:

Self-attested copy of PAN
Self-attested copy of either – Passport, Aadhar card, or Election card
Consent in form DIR-2
Copy of resolution passed by the shareholders/Directors
Notice for shareholders meeting

FAQS

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Have questions about Change Directors/Partners?

Have questions, we have you covered:

Who appoints a director in an organization?

Shareholders and the board of directors can elect or appoint a director.
Can an individual be a director of more than one company?

Yes, the number of companies where an individual can hold directorships is limited to 20 also he can/she can’t be a director of more than 10 public limited companies at a time. This includes any alternate directorship held by him/her. If the director wishes to maintain or resign from the office as the director of any of the companies within one year from the beginning, he/ she needs to inform the chosen companies about his decision as well as the concerned Registrar.
What is the timeline for removing the director?

A special notice of resolution regarding the removal of the director should be sent at least 28 days before convening the next meeting (which might be held without the director's presence).
When should the shareholders be informed about the possible removal of the director?

The notice of the possible removal of a director should be sent to the shareholders no later than 21 days before the meeting.
Can a body corporate be a director in a public/ private company?

No. Only a living person can be appointed a director of the company. A business entity or body corporate cannot be appointed as a director in a company. As per the provisions of Section 253, only an individual (living person) can be appointed as a director of a company.
Can a body corporate be a partner in an LLP?
Yes. An LLP is a body corporate that possesses a separate legal entity from that of its partners (per Section 3 of the Limited Liability Partnership Act, 2008).

Mandatory requirements for a company to act as a partner in an LLP are as follows:
- The Indian Company must be incorporated under the Companies Act, 2013, and in the case of a foreign company, the company must be incorporated under the corporate laws of the respective country.
- The company should not be a co-operative society registered under any law related to co-operative societies.
- It must not include a legal entity with a sole incorporated office being occupied by a single person.
It is mandatory for an LLP to have at least two designated partners (living individuals), of whom one should be a resident Indian (as mentioned above). In the event that all the partners of an LLP are body corporates, the body corporate must nominate individuals to act as designated partners until two individuals (who are partners in the LLP) are available to act as designated partners.
What is the consequence of not filing a DIR-12?

If the company fails to file DIR-12 within 30 days after the director’s resignation, a penalty is imposed by the government as a fixed government fee.
When does an existing partner in an LLP cease to remain a partner?
- Upon the death of a partner or in case of his/ her resignation. Also, in case of the dissolution of the partnership
- If declared to be of unsound mind by the court
- Is being considered to be insolvent or declared insolvent
For LLPs, are there any restrictions/ limits on the maximum number of partners who can work from out of the country?

No, there are no limitations to the maximum number of partners who can work from out of India. Out of the minimum two partners required for the incorporation of an LLP, one partner needs to be resident in India.
Can partners in an LLP be removed by a majority vote?

Partners cannot be removed by a majority vote unless otherwise mentioned in the LLP agreement. If the same is mentioned as a condition, a partner can be removed, and Form 4 should be filed to give effect to the removal.

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