Director Resignation vs Removal Under the Companies Act: Section 168 vs Section 169

A director leaving an Indian company can happen in several legally different ways. Two common routes are resignation under section 168 and removal under section 169 of the Companies Act, 2013. Both end the directorship, but the initiator, timing and procedure are different.

The simplest distinction is this: resignation is a voluntary act initiated by the director, while removal is an action taken by the company through its members under the statutory procedure. Treating the two as interchangeable can create defective records and confusion about when the office actually ended.

Resignation under section 168: the director initiates the exit

Section 168 allows a director to resign by giving written notice to the company. The Board does not need to “accept” the resignation as though it were approving a request. Its statutory role is to take note of the notice, while the company must complete the prescribed Registrar-related compliance. See the ICSI Companies Act e-book page for section 168.

The effective date is important. Section 168 states that the resignation takes effect from the date on which the company receives the notice or the later date specified by the director, whichever is later. A Board meeting held after receipt therefore does not normally become the event that creates the resignation date.

The section also allows the resigning director to forward a copy of the resignation, together with detailed reasons, to the Registrar within thirty days. The company must separately intimate the Registrar in the prescribed manner and place the fact of the resignation in the directors’ report laid at the immediately following general meeting.

Resignation does not erase responsibility for the past. Section 168 expressly states that a director who has resigned remains liable for offences that occurred during the period in which he or she held office.

Removal under section 169: the members initiate the exit

Removal is different because the director is not voluntarily giving up office. Section 169 generally permits a company to remove a director before the end of the term by an ordinary resolution, after giving the director a reasonable opportunity of being heard. See the ICSI Companies Act e-book page for section 169.

Section 169 requires special notice for a resolution to remove a director, or to appoint another person in place of the removed director at the same meeting. On receiving the notice, the company must send a copy to the director concerned. The director is entitled to be heard and, subject to the statutory conditions, may make a written representation for circulation to members.

Important exceptions apply. A director appointed by the Tribunal under section 242 is outside the ordinary section 169 removal route. The section also does not apply where the company has used the proportional-representation mechanism under section 163 for the relevant appointments. An independent director re-appointed for a second term can be removed only by special resolution, together with a reasonable opportunity of being heard.

Section 168 vs section 169: the practical differences

• Who starts the process: under section 168, the director starts it by written notice. Under section 169, the members initiate removal through the statutory resolution process.
• Consent: resignation is voluntary. Removal can proceed without the director’s consent, but hearing and representation rights must be respected.
• Board role: for resignation, the Board takes note. For removal, the company must run the member-meeting procedure required by section 169.
• Effective timing: resignation takes effect from the later of receipt of notice or the future date stated in the notice. Removal operates through valid member action under section 169.
• Resolution: resignation itself is not created by a shareholder resolution. Removal generally requires an ordinary resolution, except the second-term independent-director case, which requires a special resolution.

Do not confuse these routes with vacation of office

A third concept is vacation of office under section 167. Here, the office becomes vacant because a statutory trigger occurs, such as specified disqualification or another event listed in the Act. It is neither a voluntary resignation nor a shareholder removal. The current statutory triggers are set out on the ICSI e-book page for section 167.

This classification matters because the company should record the correct legal event. Calling an automatic vacation a resignation, or a resignation a removal, can distort the corporate record and the basis used for Registrar filings.

Worked example: same outcome, different procedure

Assume Director A sends a signed letter on 5 September stating that the resignation should take effect on 20 September. The company receives it on 5 September. Under section 168, the effective date is 20 September because that is later than the date of receipt. The Board should take note and the company should complete the prescribed follow-up compliance.

Now assume Director B refuses to resign but the members want to remove B before the end of the term. The company cannot simply record a Board decision saying that B has been removed. The section 169 process must be followed, including the required special notice, communication to the director, opportunity to be heard, correct general-meeting resolution and related corporate records.

Practical compliance checklist

When a director resigns

1. Preserve the written notice and evidence of when the company received it.
2. Check whether a future effective date is specified.
3. Place the resignation before the Board for noting and minute it accurately.
4. Complete the current Registrar filing and update statutory registers, authorised-signatory records, bank mandates and system access where applicable.
5. Ensure the resignation is reflected in the directors’ report as required.

When members propose removal

1. Confirm that section 169 applies and that no exception changes the route.
2. Determine whether an ordinary or special resolution is required.
3. Follow the special-notice process and send the notice to the director concerned.
4. Respect the director’s hearing and representation rights.
5. Pass the resolution at the general meeting only after the procedural requirements are satisfied.
6. If a replacement is proposed at the same meeting, ensure the section 169 conditions for that appointment are also met.
7. Complete the applicable Registrar filing and update registers, minutes and operational authorisations.

Common mistakes to avoid

• Describing a resignation as “approved by the Board” when the Board’s role is to take note of the notice.
• Using the Board alone to remove a director where section 169 requires member action.
• Ignoring the later date specified in a resignation letter.
• Skipping hearing or representation rights during removal.
• Assuming every director can be removed through exactly the same resolution.
• Failing to distinguish removal from automatic vacation of office under section 167.

Practical takeaway

Start by identifying why the director is leaving. A voluntary written notice points to section 168. A member-driven termination points to section 169 and its notice and hearing safeguards. A statutory event that itself makes the office vacant may instead fall under section 167. Getting that classification right at the start makes the Board records, shareholder process and Registrar follow-up far easier to handle correctly.