Removal of independent directors re-appointed for a second term only by way of a special resolution

Section 149(10) of the Companies Act, 2013 (‘Companies Act’) provides that an independent director of a company is eligible for re-appointment for a second term on passing of a special resolution by the company. However, under Section 169(1) of the Companies Act, a company is permitted to remove any director before the expiry of his term, by passing an ordinary resolution. Based on a joint reading of the aforementioned sections, it appeared that an independent director could be re-appointed for second term only by way of a special resolution, but may be removed thereafter by way of an ordinary resolution. The Central Government has, by way of the Companies (Removal of Difficulties) Order, 2018, amended Section 169(1) to provide that an independent director, who is re-appointed for a second term, can be removed only by passing a special resolution after giving him a reasonable opportunity of being heard.

Published In:Inter Alia - Quarterly Edition - March 2018 [ English Chinese japanese ]
Date: March 1, 2018