A Director plays a critical role in managing and governing a company. However, there may arise situations where a company needs to remove a director due to non-performance, misconduct, disqualification, or strategic restructuring.

The Companies Act, 2013 provides a clear legal framework for the Removal of Director, ensuring transparency and compliance with corporate governance norms.

This blog explains the step-by-step process for removal of a director in a simple and practical way.

What is Removal of Director?

Removal of Director means legally terminating a director’s position in a company before the expiry of their tenure.

A director can be removed by:

• Shareholders
• Operation of law (disqualification)
• Resignation by director
• Central Government or Tribunal

This guide focuses on removal by shareholders, which is the most common scenario.

Legal Provisions Applicable

• Section 169 – Companies Act, 2013
• Rule 23 – Companies (Management and Administration) Rules, 2014

Step-by-Step Process for Removal of Director

Step 1: Issue Special Notice

• A Special Notice must be given to the company at least 14 clear days before the meeting.
• Notice can be given by:
  • Members holding at least 1% voting power, or
  • Members holding shares of ₹5 lakh or more

Step 2: Intimation to the Director

• Company must send a copy of the special notice to the concerned director.
• The director has the right to:
  • Submit a written representation
  • Request circulation to members

Step 3: Director’s Representation (Optional)

• Director may send a written representation to:
  • Company
  • Members
• If representation is received in time:
  • It must be circulated to members
  • Or read out in the general meeting

Step 4: Hold General Meeting

• Company must convene:
  • Extraordinary General Meeting (EGM) or
  • Annual General Meeting (AGM)
• An Ordinary Resolution is passed for removal of director.

Note: Simple majority (more than 50%) is sufficient.

Step 5: Passing of Resolution

• Resolution is voted upon by shareholders.
• If passed, the director stands removed from the date of resolution.

Step 6: Appointment of New Director (Optional)

• A new director can be appointed in the same meeting.
• Special notice is also required for appointment if mentioned in original notice.

Step 7: Filing of ROC Forms

After removal, mandatory filings with ROC are required:

✅ Form DIR-12

• To be filed within 30 days
• Details:
  • Date of removal
  • Board / Shareholder resolution
• Attachments:
  • Resolution copy
  • Notice of meeting

Step 8: Update Statutory Registers

• Register of Directors updated
• Company records amended
• MCA master data reflects changes

Cases Where Section 169 Does NOT Apply

Removal under Section 169 is not applicable to:

• Directors appointed by Tribunal
• Directors under proportional representation
• Nominee directors (conditions apply)

Removal Due to Disqualification

In case of disqualification under Section 164, removal happens automatically due to:

• Non-filing of financials
• Non-filing of annual returns
• Conviction or fraud

ROC updates status without shareholder resolution.

Consequences of Non-Compliance

Failure to follow the correct process may lead to:

• Invalid removal
• ROC penalties
• Legal disputes
• Director reinstatement by Tribunal

Common Reasons for Removal of Director

• Breach of fiduciary duties
• Involvement in fraud
• Non-attendance of board meetings
• Loss of shareholder confidence
• Strategic restructuring

How Saving Mantra Can Help

Saving Mantra provides end-to-end support for:

• Drafting special notice & resolutions
• Conducting EGM/AGM compliance
• ROC filing (DIR-12)
• Advisory on director disputes
• MCA data correction

✅ 100% compliance driven
✅ Fast turnaround
✅ Expert CA / CS handling

Conclusion

The Removal of Director is a sensitive legal process that must strictly follow the Companies Act, 2013. From special notice to ROC filing, every step matters.

Professional handling ensures the removal is valid, dispute-free, and fully compliant with MCA norms.

The information provided in this blog is for general informational and educational purposes only and should not be construed as legal, tax, or professional advice. While every effort has been made to ensure accuracy and compliance with the applicable provisions of the Companies Act, 2013 and related rules, laws and regulations may change over time and interpretations may vary based on specific facts and circumstances.

All services are subject to applicable laws, rules, and government approvals prevailing at the time of execution.

Introduction

Income tax on mutual funds in India depends on the fund type, holding period, and gains realized, with updates from Budget 2024 affecting FY 2025-26. Equity funds face LTCG tax at 12.5% above ₹1.25 lakh after 12 months, while debt funds are taxed per slab rates. This guide breaks down taxation rules, ELSS benefits, and strategies to minimize your tax liability while investing.​

Taxation on Equity-Oriented Mutual Funds

Equity funds (≥65% in stocks) classify gains as short-term (STCG) or long-term (LTCG) based on holding period.​

• STCG (≤12 months): Taxed at 20% flat rate for sales after July 23, 2024.​
• LTCG (>12 months): 12.5% on gains exceeding ₹1.25 lakh annually, without indexation.​
• Dividends: Added to income and taxed per slab; TDS applies if exceeding ₹5,000 yearly.​

Example: Sell equity fund after 13 months with ₹2 lakh gain; pay 12.5% on ₹75,000 (₹1.25 lakh exempt).​

Taxation on Debt and Other Mutual Funds

Debt funds (post-April 1, 2023 investments) lost indexation; gains are now short-term.​

• STCG/LTCG: Taxed as per income slab (up to 30% + cess); pre-2023 investments get 12.5% LTCG >₹1.25 lakh without indexation if held >24 months.​
• Hybrid Funds: Equity-oriented (>65% equity) follow equity rules; others follow debt.​
• Liquid/Overnight Funds: Slab rates apply regardless of holding.​

Example: ₹75,000 gain on ₹5 lakh debt investment (post-2023) at 30% slab adds ₹22,500 tax.​

ELSS Funds: Tax-Saving Powerhouse

ELSS offers deductions under Section 80C up to ₹1.5 lakh, with 3-year lock-in.​

• Gains post-lock-in: Treated as equity LTCG (12.5% >₹1.25 lakh).​
• Ideal for salaried investors combining growth and savings; tax-free if gains <₹1.25 lakh.​

Tax-Saving Tips for Mutual Fund Investors

• Hold equity >12 months for LTCG benefits; use SIPs for rupee-cost averaging.​
• Offset losses: STCL against any gains; LTCL only vs LTCG, carry forward 8 years.​
• Opt direct plans to cut expenses; report in ITR-2 via capital gains schedule.​
• NRIs face TDS; consult tax advisor for DTAA benefits.​

Mutual funds have emerged as one of the most popular and effective wealth creation tools in India. They offer an avenue for both beginner and seasoned investors to participate in the financial markets without the complexities of direct stock picking. With mutual funds, your money is managed by professional fund managers who invest in a diversified portfolio of stocks, bonds, or other securities. This comprehensive guide will explain what mutual funds are, their types, how to start investing, and the best strategies to maximize returns.

What Are Mutual Funds?

A mutual fund is a pooled investment vehicle where many investors contribute money, which is then invested collectively in a variety of financial instruments. This collective investment is managed by experienced fund managers who deploy strategies to optimize growth while managing risks. Mutual funds promote diversification — spreading your investment across various assets to reduce risk and increase the potential for returns. This makes them a suitable choice for investors seeking growth as well as safety.

Types of Mutual Funds in India

Understanding the different types of mutual funds helps in choosing the right investment based on your risk tolerance and financial goals:

• Equity Funds: These funds invest predominantly in stocks and are designed for investors aiming for high growth over the long term. They carry higher risk but offer the potential for higher returns.
• Debt Funds: Focused on fixed income securities like government bonds, corporate bonds, and other debt instruments. These are safer and offer regular income, suitable for conservative investors.
• Hybrid Funds: These combine equity and debt investments to balance risk and return, appealing to moderate-risk investors.
• Index Funds: These passively track a specific index such as the Nifty 50 or Sensex, offering diversification with lower fees.
• ELSS (Equity Linked Savings Scheme): Mutual funds that come with tax benefits under Section 80C, with a mandatory lock-in period of 3 years. They attract investors looking to save taxes while investing in equity.

Why Should You Invest in Mutual Funds?

• Professional Management: Your investments are handled by skilled fund managers who analyze the market and make informed decisions on your behalf.
• Diversification: Mutual funds spread your money across multiple securities, reducing the risk compared to investing in single stocks.
• Liquidity: Most mutual funds allow you to redeem your investment easily anytime, making it a liquid asset.
• Tax Benefits: ELSS funds provide tax deductions up to ₹1.5 lakh per annum under Section 80C. Additionally, long-term capital gains (LTCG) up to ₹1 lakh per year are tax-free.
• Accessibility: Start investing with as little as ₹500 via Systematic Investment Plans (SIPs), making mutual funds accessible to all income groups.

How to Start Investing in Mutual Funds?

Follow these simple steps to begin your mutual fund journey:

1. Choose a Platform: Select a trusted online platform or mutual fund company registered with SEBI.
2. Complete KYC: Complete your Know Your Customer process online with documents like Aadhaar and PAN card.
3. Define Your Goals: Determine your investment objectives, risk appetite, and time horizon.
4. Select a Fund: Pick a mutual fund that aligns with your goals—opt for direct plans to avoid commission fees and maximize returns.
5. Start Investing: Commit to either a lump sum investment or set up monthly SIP contributions.
6. Monitor and Review: Keep track of your portfolio periodically and make necessary adjustments based on performance and changes in your goals.

Tips for Maximizing Mutual Fund Returns

• Invest Regularly with SIP: Using SIP, you invest a fixed amount every month, which helps in rupee cost averaging and minimizes the impact of market volatility.
• Diversify Your Portfolio: Invest across multiple types of mutual funds to spread risks and capture different market opportunities.
• Stay Invested for the Long Term: Markets are volatile in the short term. Staying invested for 5 years or more generally yields better returns.
• Avoid Market Timing: Trying to predict market highs and lows can be risky; consistent investment beats timing.
• Annual Portfolio Review: Assess your investments yearly and rebalance if one asset class disproportionately grows or shrinks.