Removal of an incumbent Director and appointment of a new Director in a Company must be notified to the Minister of Law and Human Rights. Learn more about this obligation and the impact if such changes are not notified.
In a Company, Directors can resign in the middle of their term. Others are dismissed by the General Meeting of Shareholders, while others simply served their term until it ends and the General Meeting of Shareholders decide whether to renew their term or seek replacement for the Directors.
Pursuant to Law No. 40 of 2007 concerning Limited Liability Company, the change of members of Board of Directors in a company is not categorized as Change of Articles of Association, but is categorized as Change of Company Data. Such categorization results in the obligation for the company to notify the change of company data to the Ministry of Law and Human Rights.
Therefore, each corporate action which results in a change in the composition of the members of Board of Directors whether through appointment, replacement, and/or dismissal of Directors by the General Meeting of Shareholders (“GMS”), must be notified to the Minister of Law and Human Rights, after the resolution and/or minutes of meeting is finalized and executed in the form of Notary Deed. Resolutions and/or Minutes of Meeting of the GMS with regard to the appointment, replacement, and dismissal of members of the Board of Directors shall also determine when the appointment, replacement or dismissal comes into effect.
In the event that the GMS does not determine when the appointment, replacement or dismissal of members of the Board of Directors comes into effect, the appointment, replacement or dismissal shall come into effect as from the close of the GMS. In the event of appointment, replacement or dismissal of members of the Board of Directors, the Board of Directors must notify the Minister within a period of not more than 30 (thirty) days as from the date of the GMS resolution of the change in the members of the Board of Directors for record in the register of Companies, as contemplated on Article 111 of the Company Law.
If the notification was not made within such time period, the Minister shall refuse any application submitted or notification delivered to the Minister by a Board of Directors which has not yet been recorded in the register of Companies. To notify, the GMS must sign another resolution, which must be notified to the Minister of Law and Human Rights.
The biggest impact of the Minister refusing the application of change of company data is that the change of Directors will not have a legal effect to the third party until the Minister issues the acceptance of the notification. Therefore, the Director appointed cannot act automatically as the Director, who has the authority to represent the Company on and off the courts, until the Minister issues a Letter of Acceptance of the change of company data which appointed him/her as Director.
Therefore, it is important that the company follows proper procedure in the event of any appointment, replacement, reorganization, and dismissal which results in the change of composition of the Board of Directors.
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