INTRODUCTION
The retirement of a company director is a crucial corporate governance event. Whether it happens due to rotation, expiry of tenure, or voluntary retirement, businesses must follow the rules laid down under the Companies Act, 2013, along with maintaining clear board documentation, filings, and updated records.
This guide explains the entire process, legal provisions, responsibilities of the company, and best practices to ensure a smooth transition.
What Does Retirement of Director Mean?
The retirement of a director refers to the formal cessation of their role in the company’s Board due to any of the following:
- Completion of their tenure
- Retirement by rotation (mandatory for certain directors in public companies)
- Voluntary retirement due to age, health, or personal reasons
- Retirement as per Articles of Association (AOA)
- Retirement at an Annual General Meeting (AGM)
It does not imply termination or removal; it is a structured exit governed by compliance procedures.
Key Legal Basis Under the Companies Act, 2013
1. Section 152 – Appointment & Retirement by Rotation
- Public companies must have at least two-thirds of directors as rotational directors.
- One-third of such directors must retire at every AGM.
- Retiring director may offer themselves for reappointment.
2. Articles of Association (AOA)
- The AOA may prescribe conditions, rotation sequence, and exceptions.
3. Board Rules & AGM Proceedings
- Retirement must be recorded in AGM minutes.
- Director can either retire permanently or seek reappointment.
Types of Director Retirement
1. Retirement by Rotation
Applicable mainly to public companies.
The longest-serving directors retire first in the rotation cycle.
2. Retirement on Completion of Tenure
Many independent and additional directors retire automatically after their fixed term.
3. Voluntary Retirement
A director may step down due to personal reasons.
4. Retirement as per AOA
The AOA may include special retirement clauses (age limit, period of service, etc.).
Step-by-Step Procedure for Retirement of Director
Step 1: Determine Category & Retirement Eligibility
Identify whether the director falls under rotational or non-rotational category.
Step 2: Place the Matter in AGM Notice
The notice must clearly state:
- Name of the director retiring
- Whether they are eligible for reappointment
- Resolution for reappointment (if applicable)
Step 3: Conduct AGM
During the AGM:
- Take necessary votes
- Record the retirement or reappointment
- Update minutes
Step 4: Issue Relief-Thank You Letter (Optional)
Companies often give acknowledgments for the director’s contributions.
Step 5: Update Statutory Registers
- Register of Directors & KMP (Form MBP-4)
- DIR-12 filing if the retirement results in cessation
Step 6: File e-Form DIR-12 with MCA
This must be filed within 30 days of the retirement if cessation occurs.
Step 7: Update Company Records
- Internal systems
- Bank mandates (if director was a signatory)
- PAN/TAN authorities (if applicable)
- Website & stationery updates
Documents Required for Retirement of Director
- Retirement Letter (if voluntary)
- Board/AGM notice and resolutions
- Attendance sheet of AGM
- Minutes of AGM
- Consent/non-consent for reappointment
- Updated statutory registers
- DIR-12 with attachments
- AOA (for reference)
Frequently Asked Questions (FAQ)
1. Is filing DIR-12 mandatory for retirement of director?
Yes, DIR-12 must be filed within 30 days if the director has retired and is not reappointed.
2. Does retirement of director mean resignation?
No.
Retirement is scheduled or procedural; resignation is a voluntary immediate exit.
3. Can a retiring director be reappointed?
Yes, unless they have expressed unwillingness.
4. What happens if the AGM is not held?
By law, directors continue in office until the AGM and retirement cycle formally occurs.
5. Is retirement of independent director allowed before tenure ends?
Independent directors cannot be reappointed after two consecutive terms, but voluntary resignation/retirement is allowed.
Post-Retirement Compliance Checklist
| Task | Mandatory? | Timeline |
|---|---|---|
| Record retirement in AGM | ✔ | Same day |
| Update statutory registers | ✔ | Immediate |
| File DIR-12 | ✔ | Within 30 days |
| Update signatories & mandates | ✔ | On priority |
| Update website & company documents | Optional | ASAP |
Conclusion
Retiring a director is a formal corporate governance process that demands proper legal compliance, timely filings, and transparent communication. Ensuring a smooth transition protects the company’s continuity and strengthens stakeholder trust.