What is Director Change?

A director change refers to the process of either appointing a new director or removing an existing one from the board of a company. This change may happen due to various reasons such as resignation, retirement, death, or a company’s restructuring. The process is subject to the provisions of the Companies Act, 2013, and must be done in a legally compliant manner to ensure it is valid.

Reasons for Director Change

1. Resignation – A director may decide to step down from the board due to personal reasons, health issues, or other professional commitments.
2. Retirement – Directors may retire once their term ends or as per company policy, especially in the case of age-based retirement provisions.
3. Death – In case of a director’s unfortunate passing, a replacement needs to be appointed.
4. Removal – Directors can be removed due to various reasons, including performance issues, violations of company policy, or disagreements within the board.
5. Addition of Skills – Companies might change their board by adding directors who bring in new expertise, skills, or fresh perspectives for business growth.

Types of Director Changes

• Appointment of a New Director
  Adding a new director to the board.
• Removal of a Director
  Removing an existing director from the board.
• Resignation of a Director
  A director voluntarily stepping down from their position.

Process for Director Change

The process for changing a director depends on the type of change being made, whether it is appointment, removal, or resignation.

1. Appointment of a New Director

Step 1: Board Resolution
The first step in appointing a new director is to pass a Board Resolution in the board meeting, agreeing to the appointment.

Step 2: Shareholder Approval
In some cases, the shareholders must approve the appointment in the Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), depending on the nature of the director (e.g., non-executive, additional director).

Step 3: File with ROC
After board and shareholder approval (if necessary), file Form DIR-12 with the Registrar of Companies (ROC) within 30 days of the appointment. This form includes the director’s consent (Form DIR-2).

Step 4: Update Company Records
Update the company's records to reflect the new director’s name and other details, ensuring that the Register of Directors is amended accordingly.

2. Removal of a Director

Step 1: Board Resolution
The removal of a director requires a special resolution passed by the shareholders in the AGM or EGM. The company must also pass a Board Resolution approving the removal.

Step 2: Notice to the Director
A director proposed for removal must be given special notice under section 169 of the Companies Act, 2013. They should be informed of the resolution and the reasons for removal.

Step 3: File with ROC
Once the resolution for removal is passed, file Form DIR-12 with the ROC to notify the change.

3. Resignation of a Director

Step 1: Director’s Resignation
The director wishing to resign must submit a formal resignation letter to the company, including the reason for their resignation.

Step 2: Board Resolution
A Board Resolution must be passed to accept the director's resignation.

Step 3: File with ROC
Once the resignation is accepted, file Form DIR-12 with the Registrar of Companies to notify the change and update company records.

Documents Required for Director Change

1. Form DIR-2 – Director’s consent to act as a director.
2. Form DIR-12 – Filed with the Registrar of Companies for appointment or removal of a director.
3. Notice of Resignation – If a director is resigning, a formal resignation letter is required.
4. Board Resolution – A resolution passed by the board to approve the appointment or removal.
5. Shareholder Resolution – Special resolution passed by shareholders (for certain appointments or removals).