Taking steps to remove a director from a company
Table of Contents
Review your service agreement, employment contract, or letter of appointment
Whenever a director’s employment is terminated, it is important to review the terms of the director’s service agreement, employment contract, or letter of appointment to see what terms have been agreed upon. You should seek legal advice if the contract does not include any reference to this point or if there is no contract and the director is an employee. If you don’t want to end up with an unfair dismissal lawsuit, you need to take precautions.
Make sure you have a copy of the company’s articles of association and shareholders’ agreement
Generally, the articles of association (and shareholders’ agreement, if it has been signed) of the company will include provisions regarding the removal of directors. If the articles are silent on this point, you should check if the Model Articles are incorporated into the articles or Table A if the Company was incorporated under the Companies Act 1985. It is provided in the Model Articles and in Table A that certain circumstances may trigger an automatic termination of a director of company
The Companies Act 2006 specifies the Procedure Under Section 168
As long as the articles of association do not provide a right for termination, the shareholders can remove the director by ordinary resolution. A director can be dismissed from his position if the procedure described in section 168 of the Companies Act 2006 is followed. At least 28 days before the meeting at which the ordinary resolution will be voted on, special notice must be given to the director concerned and the shareholders of the company. A sample letter for the removal of a board director is essential if your board decides to remove a board member.
A shareholders meeting is only required when the company receives requests from shareholders who hold the required percentage of the company’s paid-up capital. It is the director’s right to be heard at the general meeting where the removal resolution is proposed. He or she may also make representations to the company during the meeting. Shareholders who request a meeting can hold one at the company’s expense if the directors fail to convene one. The meeting must take place within three months from the date when it became necessary for the directors to hold it. In order to remove a director using the Companies Act 2006, you should seek legal advice.
Claims against the director
Claims are any disputes or claims against the director, then we recommend that you take legal advice before you serve your notice or invoke any procedures under the Companies Act 2006 or the company’s articles of association. The company may wish to consider negotiating with the director instead and signing a settlement agreement relating to any claims.
Registries at Companies House
To remove a director from the company as an officer, a form TM01 must be filed at Companies House immediately after the director has been removed.
Do directors have the right to own company shares?
When a director becomes a director, the company should always check the terms of its articles of association as well as its shareholders’ agreement (if there is one) to determine how the shares will be handled. Often, a share sale notice is served when a director is removed under deemed transfer provisions in a shareholders’ agreement or articles. Additionally, there may be provisions for good and bad leavers that include additional valuation provisions.
Without a director’s consent, can you remove them?
YES, you can remove a director from the company without the director’s consent. A procedure may be set out in the articles of association for the company, a director may be removed if they violate the terms of the director’s service agreement, and even if there isn’t a particular provision like this, there is a procedure in the Companies Act that allows a company to remove a director by ordinary resolution (a vote of the shareholders).
Is it possible to remove a director from a board of directors?
It is not without power to do so – under the Companies Act, a director can only be removed by the shareholders but if there were provisions set out in the company’s articles to allow the board of directors to remove a director, then that would be the case as well. It would have to be amended to include such a provision since the Model Articles (the standard set of articles adopted by most new companies) do not contain it. Any such action must also comply with the director’s duties (e.g. act in the company’s best interests).
Read More:
What Are the Rules for Appointing or Removing a Director?
When Should a Director Be Removed From a Private Limited Company?
