This is a comical situation under soap opera script but it must have been a practical situation in India. And yes, many dealers of “company retail market” face this situation daily. Sellers want a cut off point beyond which they do not want any liability for any single moment and buyer will take charge on very next moment after the resignation of seller. This cut – off point on time scale is a possible legal defence from all past or future sins. Under Companies Act 1956, dealers has no fine tuned pressure to create such cut – off point because there was no possibility of submission of resignation by resigning directors. Filing a return of resignation of outgoing directors, under earlier law, was duty and responsibility of incumbent directors. They have to appoint at least one new director first (if not legally required two/three, in broad sense) before resigning. During those golden days, dealers usually prepare documents in such a way time to give effect of resignation was mentioned in minutes and seconds in resignation letters. Same was also true for appointment. Thereafter, within legal thirty days, dealers ensure filing of all required documents and forms with registrar of companies. Hence, all laws complied, happy ending.
There may be other valid chances of resignation by all directors, but I may have my limitation of knowledge and imaginations. Readers may please help, in comment section of this post below.
Now, there is a government circular at least officially without asking why and how such situation arises. The circular 03/2015 dated 3rd March 2015 spell out circumstances requiring for the clarification and practical solution offered by the government.
Under present law, when all outgoing directors resign, they are free to file a copy of resignation with the Registrar of Companies in Form DIR – 11. This is an optional form and introduced to make sure better compliance of governance and cross check in case of any dispute. When a director files his resignation in Form DIR – 11 with Registrar of Companies, his digital signature certificate immediately and automatically deactivated by system for the company in question.
Now, when all outgoing directors file their resignation before appointing any new director in mutually amenable manner, there is legal hurdle, who will file return of appointment (and also of resignation) form the company. This also creates a legal vacuum and non – compliance in continuous office of directors with legal requirement of at least one/two/three directors in any company all time depending upon status of company.
“In order to enable the filing of required Form DIR – 12, government clarified that the Registrar of Companies within their jurisdictions are authorised on request of the “stakeholders” and after due examination, to allow any one of the resigned directors who was an authorised signatory director for the purpose of filing Form DIR – 12 only along with additional fees, as applicable and subject to compliance of other provisions of Companies Act, 2013.”
The circular also indicate an alternative mechanism in MCA21 system very soon.
Now, the term “stakeholders” for this circular is not defined and otherwise the definition is wide enough. This may also result in further controversy. I also notice “due examination” here in circular. This is very subjective and indicative some “subject” here.
For legal and practical reason, this is good step by MCA. However, need of making such representation is a question on professional competence to educate clients.
This may also be noted that in case condition arise as mentioned in the circular, Provision of Section 168(3) of the Companies Act 2013 shall be applicable. New directors in required numbers shall be appointed by promoters or Central Government, who shall hold office till the directors are appointed by the company in general meeting.
Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.
Form DIR 11 filing is optional OR mandatory u/s. 168 (1) first proviso?
Yes, this is mandatory to be filed within 30 days.
I understand, you are pointing out that resigning directors are under legal obligation to file resignation within 30 days and in such case, situation as pointed out may arise. I agree with you.
However, why all directors including promoter – directors or directors representing promoters will resign along with all other directors? There is limited scope for imagination.
Hope, you may help me and other readers.
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