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RESIGNATION OF ALL DIRECTORS IN A COMPANY

As per Section 149(1)of the Companies Act, 2013, every company shall have a board of directors consisting of individual directors. In case of a public company a minimum of 3 directors are needed and in case of a private company, a minimum of 2 directors are needed to ensure smooth functioning of the company. The minimum number of directors in a producer company has to be five and in the case of an OPC (One Person Company) having one director is mandatory.

The maximum number of directors in a company can be 15 and there is a need for a special resolution to be passed if a company wants to hire more than fifteen directors.

Also, out of all directors appointed, atleast one of them should have resided in India for more than one hundred and eighty-two days in the previous calender year.

CASES WHERE ALL DIRECTORS END UP RESIGNING AT THE SAME TIME:

WHEN THERE IS A FULL BOARD RESIGNATION:

All the members of the board may resign for a number of reasons though it may seem unlikely in a country like India which has a majority of family-run firms.

A few situations in which the director should consider resigning are:

• in the case of a violation of the corporation’s by-laws or material contravention of the law or,in the shareholders agreement or the corporation’s undertakings, if the contravention is not corrected soon;

• if he is not allowed to perform his duties despite various requests made to the Board.

• if he is unable to devote the time and efforts required to perform his duties, or if he is not prepared to do so;

• in the case of bankruptcy or insolvency, if the director is unable to obtain adequate protection from the trustee, the corporation’s creditors or other third parties;


• in certain cases, if he disagrees with the corporation’s major practices or orientations, and if he has advised the Board of his disagreement and the importance that he attaches to such disagreement;

WHEN THERE IS A FULL BOARD DISQUALIFICATION:

A full board disqualification is always achieved by the directors of a company themselves,but is never imposed by the government.

What are the grounds for disqualification as a company director?

1)Wrongful trading or conducting of business for example trading while  he has become insolvent

2)Failure to comply with the relevant law

3)Not adhering to the filing rules as laid down in the Companies Act

4)Unfit or immoral conduct.

 

CONSIDERING THE RESIGNATION:

There is little meaning for a  director to remain on a board which is divided on fundamental issues. A reason directors choose to resign consist of  suspected or known breaking of law, regulations and accounting standards . Directors who resign run the risk of turning into whistleblowers.

WHAT HAPPENS WHEN ALL DIRECTORS OF A COMPANY RESIGN AT THE SAME TIME?

Even when all directors of a company resign at the same time the company does not stop functioning. Using the concept of perpetual succession, a new set of directors are appointed who are expected to carry forward the legacy and  of the company.

Section 168(3)of The Companies Act, 2013 states that when all directors of a particular company resign from the Board, the promoter or the Central Government, in absence of a promoter, shall appoint the required number of directors who are going to hold the office until new directors can be appointed in a general meeting.

WHO IS RESPONSIBLE WHEN ALL THE DIRECTORS OF A COMPANY RESIGN?

If a company has no appointed director, the shareholders of the company may have the authority to appoint new directors.. Section 152 of The Companies Act, 2013 provides that  "save as otherwise expressly provided in this Act, every director shall be appointed by the company in general meeting."

WHAT ARE THE DIFFICULTIES FACED WHEN ALL DIRECTORS RESIGN AT ONCE?

Filing of eforms on MCA portal requires digital signatures of the Authorised Signatory Director. When all the directors resign from the Board, there is no authorised signatory director left in the Company. Therefore eform for appointment of new director can’t be filed.

However, MCA issued a clarification in this regard vide General Circular No. 3/2015 dated 3rd March, 2015. MCA clarified that in such scenario , the ROC may allow any one of the resigned directors (who was an authorised signatory of the Company) to file the eform as applicable and subject to the compliance of other provisions of Companies Act, 2013.

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