Solicitor Emma Ford, in our Corporate & Commercial team, explains when and how a company director can be removed.
The removal of a director from your company can be a challenging step, given the stringent legal process that must be followed in accordance with the Companies Act. Our Corporate & Commercial team can advise you from the outset, ensuring that the process is carried out professionally and sensitively, and to avoid any future legal disputes.
A director is able to resign voluntarily, by way of notice to the company and the board, unless the articles of association of a company state otherwise. There are various other circumstances in which a director’s appointment will end, including death or the expiration of a fixed term. However, there may be a situation in which the company wishes to remove a director involuntarily, by way of the statutory process that is outlined in the Act.
Under s.168 of the Act, a company may by an ordinary resolution of the shareholders, remove a director before the expiration of their period of office. An ordinary resolution requires consent of more than 50% of the shareholders of the company.
The right of removal of the director will apply, regardless of any contrary provision in any agreement between the director and the company and will override any such contrary provision in the director’s service contract, in addition to the company’s articles.
That said, it is important to check the articles of association and/or any shareholders’ agreement that is in place, to ascertain any terms around the termination of directorships.
Procedure
S.168 of the Act contains detailed procedural requirements for the removal of the director to be carried out validly. It is particularly important to adhere to these steps, as the outgoing director will otherwise have grounds to dispute the removal and render it void.
- Notice of Proposed Removal
The s.168 ordinary resolution to remove the director must be passed at a physical meeting, rather than by way of a written resolution.
The shareholders should serve a notice on the company of the proposed resolution to remove the director (hereafter referred to as ‘Notice 1’).
The resolution will only be effective if this notice is circulated to the company (i.e. the statutory board of directors) at least 28 clear days before the proposed general meeting.
‘Clear days’ do not include the day that the notice is circulated or the day of the meeting. In this case, you would need to circulate Notice 1 on Day 1 and then convene the meeting on Day 30, in order to allow for 28 clear days to have passed in the meantime. If the notice is sent via first class post, it will be deemed received 48 hours after postage. Our team can advise you of the technicalities of timings here.
- Directors’ Board Meeting
A board meeting of the directors should be held as soon as Notice 1 is received, to consider the resolution and approve a general meeting being convened. If the director to be removed chooses to attend this meeting, they cannot vote or count as part of the quorum, given their personal interest in the proposed resolution. A set of signed board minutes should reflect the board decision to call a general meeting.
- Notice of General Meeting
At least 14 clear days before the proposed general meeting, the statutory directors should send a notice to the shareholders to call the general meeting (‘Notice 2’). Notice 2 should specify the time and date of the general meeting, being at least 28 clear days from the circulation of Notice 1.
- Notice of Proposed Removal to Be Sent to the Director Concerned
Copies of Notice 1 and Notice 2 should be sent to the director concerned. We would advise that these are sent by recorded delivery, or with a request for an email receipt, to confirm that the director has received these. - Director’s Representations
The relevant director is entitled to be heard at the general meeting. If the director makes representations in writing to the company, these may be circulated to the shareholders prior to the meeting. Alternatively, the director may require that the representations are read out at the meeting. - General Meeting
Following any representations from the director at the meeting, the ordinary resolution should be passed and a signed written record should be maintained to confirm that the resolution has been passed. This will implement the removal of the director with immediate effect. - Administrative Matters
The removal of the director will need to be reflected at Companies House by filing the Form TM01 using the online webfiling service, within 14 days of the removal.The company’s register of directors should be updated to reflect the date of termination of the directorship.
If the above procedure is not followed, the resolution is likely to be invalid and the director may be entitled to damages. We would advise that professional legal guidance is sought to ensure compliance with this process. Please get in touch with our Corporate & Commercial team
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
