Question

Q7)Mr. Kleas was appointed as a director and signed a service contract which would last for 3 years as per the provisions of the agreement and in line with the articles of association. Due to trust issues, the shareholders had applied to the court, changed the articles and removed the director from its position.

Require:

Discuss whether Mr. Kleas can sue the company for compensation on the grounds of wrongful dismissal.

Answer 1

A company can remove its director before the expiry of the period offer by passing a shareholders resolution.The resolution to remove the director is passed by a simple majority (i.e. anything over 50%) of those shareholders who are entitled to vote, voting in favour. The company must send the notice to all the members. Also, the company has to intimate the director about the removal. Mr. Kleas will have an opportunity of being heard. He may send his statement to the company and company may circulate it to the members. If the time period is short then such statement may be read in the general meeting. If members deem fit, they may remove the director by passing an ordinary resolution. The company must file the form for removal of a director with MCA within 30 days from the removal. if even after that Mr. Kleas feels that he was removed by unlawful means he can go to the court against shareholders decision and can sue the company for compensation on the grounds of wrongful dismissal.