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Cessation of Director

A director is a person appointed to direct and manage the affairs of a company. Directors are responsible for managing the company's affairs, making decisions, and ensuring compliance with laws and regulations and also can be held liable for any losses or damages caused to the company or its stakeholders due to their negligence or misconduct.

Types of Directors:

·       Executive Directors

·       Non-Executive Directors

·       Independent Directors

·       Nominee Directors

·       Alternate Directors.

Eligibility:

·       A person must be at least 18 years old, have a Director Identification Number (DIN), and not be disqualified under the Companies Act, 2013.

Process for appointing a Director:

Step 1: Board Resolution

The company's board of directors passes a resolution to appoint a new director.

Step 2: Shareholder Approval

The appointment of a director requires shareholder approval. The company must convene a general meeting to obtain shareholder approval.

Step 3: Director's Consent

The proposed director must provide their consent to act as a director of the company.

Step 4: Director Identification Number (DIN)

The proposed director must obtain a DIN from the Ministry of Corporate Affairs (MCA).

Step 5: Filing with the Registrar of Companies (ROC)

The company must file Form DIR-12 with the ROC within 30 days of the appointment.

Requirements for appointing a director:

The following are required for the appointment of a director:

1. Board resolution

2. Shareholder resolution

3. Director's consent

4. DIN

5. Identity proof and address proof of the director

Condition of Cessation of Directors

1. Resignation: A director may resign from their position by giving a notice in writing to the company.

2. Removal: A director may be removed from their position by the shareholders of the company through a resolution passed at a general meeting.

3. Disqualification: A director may be disqualified from holding the position of a director if they are convicted of certain offenses, become insolvent, or are declared to be of unsound mind.

4. Death: A director's position becomes vacant if they die.

5. Retirement: A director appointed for a fixed term must retire at the end of their term.

Filing Requirements

The company must file the following forms with the Registrar of Companies (ROC) within the specified timeframe:

1. Form DIR-11: Notice of resignation of a director

2. Form DIR-12: Particulars of appointment and cessation of directors and the key managerial personnel

Frequently Asked Question:

1. Q: Who can appoint a director?

A: The shareholders of the company can appoint a director through a resolution passed at a general meeting.

 

2. Q: What is the procedure for appointing a director?

A: The procedure for appointing a director involves passing a resolution at a general meeting, obtaining the director's consent, and filing Form DIR-12 with the ROC.

 

3. Q: Can a director be appointed for a fixed term?

A: Yes, a director can be appointed for a fixed term, but the term cannot exceed five years.

4. Q: Who is eligible to be appointed as a director?

A: A person who is at least 18 years old, has a DIN, and is not disqualified under the Companies Act, 2013, is eligible to be appointed as a director.

 

5. Q: What forms need to be filed with the ROC for the appointment of a director?

A: Form DIR-12 need to be filed with the ROC for the appointment of a director.

 

6. Q: What is the timeframe for filing forms with the ROC?

A: The forms must be filed with the ROC within 30 days of the appointment of the director.

 

7. Q: Is a DIN required for the appointment of a director?

A: Yes, a DIN is required for the appointment of a director.

 

8. Q: What is the process for obtaining a DIN?

A: The process for obtaining a DIN involves filing Form DIR-3 with the ROC, submitting necessary documents and paying the required fees.

 

9. Q: How many directors must retire by rotation at every AGM?

A: One-third of the total number of directors, other than independent directors, must retire by rotation at every Annual General Meeting.

 

10. Q: Can a retiring director be re-appointed?

A: Yes, a retiring director can be re-appointed at the Annual General Meeting.

 

11. Q: Can a director resign from their position?

A: Yes, a director can resign from their position by giving a notice in writing to the company.

 

12. Q: Can a director be removed from their position?

A: Yes, a director can be removed from their position by the shareholders of the company through a resolution passed at a general meeting.

 

13. Q: What forms need to be filed with the ROC for director cessation?

A: Form DIR-11 and Form DIR-12 need to be filed with the ROC for director cessation.

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Frequently Asked Questions

Chartered Accountants (CAs); Tax Return Preparers; Tax Consultants and Certified Tax Professionals are the experts in India who can guide and file returns.

Private Limited Company set-up process typically takes around 10-12 working days. However, it can vary depending on several factors, such as the speed of document submission, verification, and approval from the authorities.

Selection of suitable entity structure for a startup involves considering several factors such as:

1. Business Goals: Define your startup's mission, vision, and objectives.
2. Ownership: Determine the number of owners (sole proprietorship, partnership, or multiple owners).
3. Liability: Consider the level of personal liability protection needed.
4. Taxation: Think about tax implications.
5. Funding: Will you need to raise capital from investors or lenders?
6. Growth Plans: Consider future expansion, mergers, or acquisitions.
7. Compliance: Evaluate the regulatory requirements and compliance burden.
8. Flexibility: Assess the need for flexibility in decision-making and management.

Common business structures for startups:
1. Sole Proprietorship: Simple, low-cost, but offers no liability protection.
2. Partnership: Shared ownership, but partners have personal liability.
3. Limited Liability Partnership (LLP): Combines partnership benefits with liability protection.
4. Private Limited Company: Offers liability protection, tax benefits, and credibility.
5. Limited Liability Company (LLC): Flexible with liability protection.

The Presumptive Taxation Scheme (PTS) offers several benefits to small businesses and professionals:

1. Simplified Accounting: No need to maintain detailed accounts and records.
2. Estimated Income: Tax is calculated on an estimated income, rather than actual profits.
3. Reduced Compliance: No requirement to get accounts audited.
4. Lower Tax Liability: Tax is calculated at a prescribed rate.
5. Exemption from Tax Audit: No requirement to get tax audit done.
6. Easy Calculation: Profit is calculated on a fixed percentage of gross receipts.

No, you cannot obtain two Director Identification Numbers (DIN) for two companies. DIN is a unique identifier assigned to an individual who is a director or proposed to be a director of a company. If you want to be a director in two companies then you can use the same DIN for both companies.

Yes, it is mandatory to maintain records of all financial transactions for your business. The Companies Act, 2013 and the Income Tax Act, 1961, require businesses to maintain accurate and complete financial records and it should be accurate; up-to-date; easily accessible for inspection by authorities and must be retained for a minimum of 8 years.

Maintaining financial records helps:
1. Track business performance: Accurate records can help you track your business performance, identify opportunities and problems and compare your business to others.
2. Prepare financial statements: Accurate records are needed to prepare financial statements, such as income statements and balance sheets. These statements can help you manage your business and deal with creditors and banks.
3. File tax returns: Accurate records can help you comply with tax laws and avoid penalties.
4. Detect and prevent fraud: Accurate records can help prevent and detect fraud and theft.

Failure to maintain proper financial records can result in penalties, fines, and legal issues.


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