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Unit 10: Management of Company

10.10.1 Removal by Shareholders Notes

Section 284 provides that a company may, by ordinary resolution passed in general meeting
after special notice, remove a director before the expiry of his term of office. On receipt of the
special notice, the company must forthwith send a copy thereof to the director concerned to
enable him to make a representation. If he makes a representation in writing and requests the
company to notify it to the members, the company must, unless it is received by it too late for it
to send to the members, state the fact of the representation in any notice of the resolution given
to the members. It should also send a copy of the representation to every member of the
company to whom notice of the meeting is sent. If the representation is not sent as aforesaid, the
company must at the instance of the director concerned read it out at the meeting. The director
is also entitled to be heard on the resolution at the meeting.
The special notice given by the member(s) must specify the reasons for removal of the director.

However, the copy of the representation of the director sought to be removed, need not be
circulated nor the concerned director be allowed the right to have the representation read out in
the general meeting (where the same was not circulated earlier because of late receipt), if the
company or any other person claiming to be aggrieved, has made an application to CLB to
prevent such circulation or reading out on the ground that such circulation or reading out would
amount to abuse of the right on the part of the concerned director to secure needless publicity for
defamatory matters, and CLB, being satisfied, orders accordingly.
The vacancy caused by the removal of a director may be filled at the same meeting and if so
filled, the person appointed thereto will only hold office for the residual period of the removed
director. If the vacancy is not filled by the company in general meeting, the Board of directors
may fill it as if it were a casual vacancy in accordance with s.262, but the board cannot appoint the
removed director.
A removed director may claim compensation for loss of office as a director, or claim damages
for the termination of any other office on account of the removal, or may continue to hold the
additional office.

But the following directors cannot be removed by the company in general meeting:
A director appointed by the Central Government under s.408.
A director of a private company holding office for life on April 1, 1952.
A director elected by the principle of proportional representation under s.265.
A director appointed by the Central Government under Industries (Development and
Regulation) Act, 1951.
A director appointed under Sick Industrial Companies (Special Provisions) Act, 1985.
A director appointed by financial institutions under their statutory powers.

A nominee director.
A director appointed by CLB (s. 402).
It is to be noted that s.284 is not exhaustive as it is stated therein that nothing in s.284 shall be
taken as derogating from any power to remove a director which may exist apart from the
section. The articles of a company may provide for the removal of a director.
Thus it is to be noted that the power to remove a director is not an absolute or unrestricted one.

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