Company directors carry significant responsibility and are required to act in the best interests of the business. Any breach of duty or failure to comply with the company’s articles of association must be taken seriously. In certain situations, a director’s actions may be so concerning that removal from office becomes necessary.
There are several ways a director can be removed, depending on the circumstances and the company’s structure. Below, we outline four common approaches. For guidance tailored to your situation, it’s always best to consult a legal professional.
1. Removal Under the Articles of Association
The articles of association are the rules that govern how a company is run. They often set out specific circumstances in which a director automatically ceases to hold office. Common examples include illness, incapacity, bankruptcy, or removal by a vote of the other directors.
If a director needs to be removed for the good of the company, the board can refer to the articles to determine whether there is a clear route for removal. Using the articles as a starting point can make the process more straightforward and provide a firm legal basis for the action.
2. Removal by Shareholder Resolution
Where the articles of association do not provide for removal, shareholders can dismiss a director through an ordinary resolution, meaning a simple majority of more than 50% approval at a general meeting. This option allows the company to remove a director even before the completion of their term of office.
Shareholder resolution can override contractual agreements between the director and the company, ensuring the board or shareholders retain ultimate control. It is a widely used mechanism, particularly when removal under the articles is not possible or practical.
3. Following the Statutory Procedure
A director’s removal by resolution must follow a statutory procedure to ensure fairness and compliance. The shareholder or board member proposing removal must give special notice at least 28 days before the meeting. The company is then required to forward this notice to the director concerned.
Following receipt of the notice, a board meeting is held to convene a general meeting for the resolution. Before any decision is made, the director has the right to address the meeting and present their case to shareholders and other directors. This ensures that all parties have an opportunity to consider the director’s perspective before removal.
4. Removal Through the Courts
In cases of serious misconduct or unfitness, a director may be disqualified from holding office by a court order. Disqualification can last for a period of up to 15 years and provides a formal way to prevent unsuitable individuals from acting as directors in the future.
It is important to note, however, that disqualification does not automatically affect a director’s position as a shareholder. If the director owns shares in the company, additional arrangements may be needed to facilitate a buyout or transfer of those shares.
Need Advice on Removing a Director?
The process of removing a director is complex and can carry significant legal consequences if not handled correctly. At Carter Bond Solicitors, we assist businesses at every stage from reviewing the articles of association and preparing shareholder resolutions to guiding clients through court proceedings when necessary.
To discuss your options and ensure the process is handled properly, contact us on 020 3475 6751 or email info@carterbond.co.uk to arrange a consultation.
Disclaimer: This article is for general information only and does not constitute legal advice. Professional advice should always be obtained before taking action.
