How do I remove a director?
If a company director is underperforming, or they are in disagreement with the majority of stakeholders when it comes to the business’ strategy, there may be no alternative option but to remove them.
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.
To remove a director, the majority shareholders must service written notice to the director in question.
If these powers are not outlined in a company’s articles of association, there is a procedure within the Companies Act 2006 whereby if over 51% of those within the company agree, the director can be removed.
The removal of a director is subject to any rights they may have in their employment contract or service agreement. It is therefore important to seek legal advice before removing a director to ensure you are not breaching any terms.
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.
What are the articles of association?
Articles of association are effectively the rule book for the company, created when a limited company is set up. All limited companies must have these in place.
If you set up a company at Companies House, you will more than likely end up with their model articles of association. There are three types of model articles available at Companies House:
- Private companies limited by shares;
- Private companies limited by guarantee; and
- Public companies
The articles of associations set out how tasks such as appointing or removing directors should be completed.
Types of director removal
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.
Do I need a solicitor to remove a director?
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 from a specialist dispute resolution solicitor prior to taking any of the above steps.