Appointing & Removing Company Directors in Bangladesh

Legal Framework for Directorship

The appointment, removal, and overall governance of company directors in Bangladesh are primarily regulated by the Companies Act 1994. The Board of Directors holds a fiduciary position, entrusted with the management and strategic direction of the company. Consequently, adherence to the statutory procedures for any change in the Board's composition is not merely a procedural formality but a mandatory legal requirement to ensure corporate compliance and maintain the validity of the Board's actions. All changes must be duly reported to the Registrar of Joint Stock Companies and Firms (RJSC).

Procedure for Appointing a Director

The method of appointment varies depending on whether they are the first directors or subsequent directors.

1. First Directors: As per Section 91 of the Companies Act 1994, the first directors of a company are typically named in its Articles of Association and are deemed appointed upon the company's incorporation.
2. Subsequent Directors: Directors are appointed by the shareholders in a General Meeting. The Articles of Association usually provide for a certain number of directors to retire by rotation at each Annual General Meeting (AGM), and the shareholders elect directors to fill these vacancies.
3. Appointment by the Board: The Board of Directors may appoint directors in two specific scenarios:
   a) Casual Vacancy: Under Section 94, if a vacancy arises on the Board due to death, resignation, or disqualification, the remaining directors can appoint a director to fill this 'casual vacancy'. This appointee holds office until the next AGM.
   b) Additional Directors: Under Section 95, the Board may appoint 'additional directors' if authorised by the Articles. These directors also hold office only up to the date of the next AGM.
4. Filing with RJSC: Pursuant to Section 92, no person shall be appointed as a director unless they have filed with the Registrar a consent in writing to act as such director. This is done via Form IX. Furthermore, any change in the directorship must be notified to the RJSC by filing Form XII within 15 days of the change.

Procedure for Removing a Director

The removal of a director before the expiry of their term is a significant corporate action governed by a strict procedure under Section 106 of the Companies Act 1994.

1. Ordinary Resolution with Special Notice: A company may, by ordinary resolution, remove a director. However, a 'special notice' is required for any resolution to remove a director. This notice of the intention to move the resolution must be given to the company by a shareholder not less than 14 days before the meeting.
2. Notification to the Director: The company must forthwith send a copy of the special notice to the director concerned.
3. Director's Right to be Heard: The director facing removal has a statutory right to be heard on the resolution at the meeting. They are also entitled to make written representations, which the company must circulate to the members, or have them read out at the meeting if circulation is not possible.
4. Passing the Resolution: The resolution is passed if it receives a simple majority of votes at the General Meeting.
5. Filing with RJSC: Following the removal, the company must file an updated Form XII with the RJSC to reflect the change in the Board's composition.

Statutory Compliance & Filings

Failure to comply with these statutory requirements can result in penalties for the company and its officers, and may lead to legal challenges regarding the validity of the Board's composition and its decisions. It is imperative to handle these matters with meticulous attention to legal detail.