How do I remove a director?
Small business shareholders or guarantors can appoint or remove a company director by members at any time, providing such actions do not breach the Companies Act 2006, the articles of association or a director’s service contract.
Your company must have at least one natural director appointed at all times and you should therefore take this into account when deciding to remove one.
Types of removal
- Termination of employment
- Automatic removal
- Dismissal by the board
- Ordinary resolution
- Court order
Provided that there is nothing preventing the director from doing so in the articles, they may resign at any time. A director will need to give proper notice to the company; a notice period will only be required if there is a requirement for this in the articles.
Termination of employment
Most directors will also be employees. The termination of their employment does not automatically result in their removal as a director. However, many service agreements will contain a provision that provides for the end of the director’s appointment on the termination of their employment.
There are a number of circumstances in which the director will automatically vacate his or her office; these will be set out in the company’s articles. Common examples are if the director has become bankrupt or is mentally incapable.
A director’s appointment will also automatically terminate on their death.
Dismissal by the board
The articles may contain a power for the board to dismiss a director. Such a power must be exercised in accordance with the director’s duties to the company and not for any ulterior motive.
The Companies Act 2006 allows a company to remove a director by passing an ordinary resolution at a meeting. Special notice needs to be given and the resolution must be passed at a meeting. The company’s articles may impose further requirements for removing a director.
When should I seek legal advice?
The process of removing a director is complex and if the correct procedure is not followed, the removal may be voided. In addition to this, there are many other issues that need to be considered (e.g. their rights as an employee). It is therefore advisable that you seek legal advice prior to taking any of the above steps.