Appointing and removing a company director

A company director can be appointed at any time after incorporation. Likewise, a director can resign or be removed by members (shareholders or guarantors) at any time, providing such actions do not contravene any provisions in the Companies Act 2006, the articles of association or a director’s service contract.

A company must always have a minimum of one natural (human) director. Therefore, if a sole natural director resigns or is removed from a company, a new director should be appointed immediately.

Contents:

1. How to appoint a company director after incorporation
2. Do I need to provide a director’s middle name?
3. What does Companies House mean by director’s ‘occupation’?
4. How to change a director’s details at Companies House
5. Are directors’ details made available to the public?
6. Can I be an anonymous company director?
7. How to remove a director
8. Can a director be disqualified?
9. Can I resign if I am the sole director of my company?

 

1. How to appoint a company director after incorporation

The process of appointing a company director is very simple and can be carried out online or by post during or after incorporation. Company members will decide who to appoint and the powers with which they will be granted. To do so, the following details must be submitted to Companies House on the company formation application or form AP01:

  • Company name.
  • Company registration number (CRN).
  • Date of appointment.
  • Title, full forename(s) and surname, including any former name(s).
  • Date of birth.
  • Residential address.
  • Service address.
  • Occupation.
  • Nationality.

If you wish to appoint a corporate director, the company must have at least one other director who is a natural person. The following details must be submitted on form AP02:

  • Company name.
  • Company registration number.
  • Date of appointment.
  • Registered name and number of corporate director.
  • Registered office or principal address of corporate director.
  • Registration place of corporate director.

The quickest and easiest way to file this information is online via Companies House WebFiling or 1st Formations free Online Company Manager. Information is sent electronically to Companies House, and the public register will be updated to reflect the new appointment within 24 hours.

The statutory register of directors should also be updated as soon as possible. This record is kept at the registered office or SAIL address and must be made available for public inspection.

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2. Do I need to provide a director’s middle name?

Companies House requests the surname and full forename(s) of all appointed directors. Whilst there is no legal requirement to include directors’ middle names, this information may be requested by banks, lenders, and other third parties at some stage during the life of a company. If there is no significant reason to withhold a middle name, it would be best to avoid any potential problems by simply including it at the time of company formation or when a new director is appointed, after formation.

3. What does Companies House mean by director’s ‘occupation’?

When you appoint a director during of after incorporation, you will be asked to provide his or her ’occupation’. Directors do not require any formal qualifications. The role is predominately managerial and administrative, but many individuals also have specific professions or business occupations in addition to their role as a director.

What does a company director do?
Often, their occupation will form a large part of their role as a director if they are, for example, a qualified accountant or lawyer, a sales or marketing executive, an IT specialist, an HR manager or a chartered secretary. You can therefore list a director’s occupation as a specific profession, if applicable, or you can simply leave that section of the appointment form blank.

4. How to change a director’s details at Companies House

With the exception of a company director’s date of birth, you can change any other details that have been registered with Companies House. In the majority of circumstances, it is very easy to make such amendments. This can be done online in a matter of minutes through Companies House WebFiling service or 1st Formations website. Companies House will update these details on the public register within approximately 24 hours.

If the wrong date of birth has been registered for a director, the only way these details can be changed is by removing the director on form TM01 and reappointing him or her on form AP01. This is simply because a date of birth should never have to be updated, therefore Companies House provides no option for amending such details other than the removal and reappointment of the director.

5. Are directors’ details made available to the public?

Yes, all directors’ details submitted to Companies House at the time of their appointment will be displayed on public record, with the exemption of home addresses. However, if a director chooses to provide a residential address as his or her service address, these details will be placed on public record.

6. Can I be an anonymous company director?

The personal details of directors are displayed on public record. Whilst this may not pose a problem for most people, some directors do wish to maintain their privacy and remain anonymous. In such instances, it is possible to appoint a nominee director whose details will be placed on public record on behalf of the true director.

A nominee is appointed in name only, in a non-executive capacity; therefore, all statutory rights and responsibilities remain in the hands of the true director.

7. How to remove a director

A director can be removed from a company for a number of reasons, but the resignation or termination must be in accordance with the terms of the Companies Act 2006, the company’s articles of association, and any service agreement between the director and the company. You must ensure that your company has at least one natural director appointed at all times; therefore, you should take this into account if the sole director is leaving or being removed.

Voluntary resignation

If a director resigns within the terms of his or her contract, or you ask a director to take voluntary resignation to avoid dismissal proceedings, you should notify Companies House online or by post using Form TM01 within 14 days of the resignation. The public register will be updated to reflect this information, and the company’s statutory register of directors must also be updated accordingly.

How to close a private limited company

Removal under the articles of association

The model articles of association contains a number of provisions that require the immediate removal of a director in the following circumstances:

  • A provision of the Companies Act 2006 or any other UK legislation prohibits a director from remaining in office.
  • A bankruptcy order is made against a director.
  • A director is deemed physically incapable of remaining in office by a registered medical practitioner.

Removal by ordinary resolution of members

If the reason for termination is not covered in the articles of association, the shareholders can remove a director by passing a resolution. This procedure is often used when shareholders are unhappy with the general performance of a director. Provided the reason for dismissal doesn’t violate any legislation or contractual agreement, the shareholders can pass an ordinary resolution with a simple majority vote.

To pass an ordinary resolution, shareholders must be given ‘Special Notice’ of at least 28 days before the vote is taken at a general meeting. The director in question must also be notified to allow him or her to attend the meeting and make representations. If a majority vote is achieved, Form TM01 must be filed with Companies House within 14 days of the termination.

Removal by the Court or other authority

If a director fails to maintain his or her statutory duties and responsibilities, or his or her conduct is deemed ‘unfit’ for any other reason, an official complaint can be made to the Insolvency Service by any member of the company or public. A director can also be disqualified by the Court, Companies House, HMRC, the Competition and Markets Authority, the Financial Conduct Authority, or a company insolvency practitioner.

‘Unfit’ conduct is categorised as:

  • Continuing to trade to the detriment of creditors when a company is insolvent (unable to pay its bills).
  • Failing to keep proper accounting records.
  • Failing to prepare and file annual accounts and/or annual returns.
  • Failing to deliver tax returns and/or pay tax liabilities to HMRC.
  • Failing to co-operate with an insolvency practitioner or the Official Receiver.

How to notify Companies House

You can notify Companies House about the removal of a director using 1st Formations Online Company Manager. Our software filing service also allows you to file copies of resolutions, if applicable, to support the termination. Information is sent electronically to Companies House and the public register will be updated accordingly within approximately 24 hours. You may notify Companies House about a new director appointment at the same time, if required.

8. Can a director be disqualified?

If a director fails to meet the legal requirements of his or her role as outlined in the Companies Act 2006 and the articles of association, he or she can be removed from a company and disqualified as a director. Any person who is a disqualified company director is prohibited from holding such a position in any other company for the duration of the ban.

Service address for company directors

Disqualified directors can be banned for a period of up to 15 years. They are also prohibited from being the director of a foreign company with UK connections; being involved in forming, marketing or running another company; and being a member (partner) in a Limited Liability Partnership (LLP). Any violation of the terms of a disqualification order can lead to a considerable fine or a prison sentence of up to 2 years.

Causes of director disqualification

Directors can be immediately disqualified in the following circumstances:

  • Failure to meet the minimum age requirement of 16.
  • Declared bankrupt or subject to any bankruptcy proceedings.
  • Served with a Debt Relief Order.
  • Continuing to trade when a company is insolvent (unable to pay its bills).
  • Failure to maintain accurate accounting records.
  • Failure to file annual accounts and/or annual confirmation statement at Companies House.
  • Failure to pay corporation tax or any other taxes.
  • Using company finances or assets for personal gain or benefit.
  • Failure to maintain any other statutory duties as per the Companies Act 2006

Applications to investigate a director’s conduct can be made to Companies House, the Court, the Insolvency Service or an insolvency practitioner. Following a complaint, a letter will be sent to the director outlining the allegations, the intention to proceed with the disqualification investigation, and the ways in which the director is entitled to respond.

Any director who is under investigation should seek legal advice and proceed in one of three ways:

  • Await notification of a court date for disqualification.
  • Defend the allegations if believed to be untrue.
  • Avoid court action by initiating voluntary disqualification.

After disqualification

Details of disqualified directors are added to the Disqualified Directors Register by Companies House. This information is available to all members of the public. In some situations, it is possible to apply to the Court to revoke a ban or to lift the restrictions of bankruptcy, but such applications are assessed on a case-by-case basis.

9. Can I resign if I am the sole director of my company?

If you wish to resign as the sole director of a company in which you own shares, you may appoint another director to run it on your behalf. Alternatively, if your company is solvent, you can sell the business and its assets to someone else, or dissolve (close) it and sell its assets.

Appointing a new director to manage the company

If you wish to maintain ownership and hand the reigns over to someone else, you can remain as a shareholder and choose an experienced individual to run the business on your behalf. As a shareholder, you will retain the same percentage of ownership and control (unless you sell some of your shares) and you will still be entitled to receive surplus profits through dividend payments. You will also remain fully liable for contributing the value of your shares toward company debts.

To appoint a new director, you must first file Form AP01 ‘Appointment of director’ with Companies House. As soon as his or her details have been registered, you may resign from the company on Form TM01.

Selling the company and assets

A limited company exists as a distinct legal entity that is separate from its owners. This means you can sell it to someone else. Selling a company can sometimes be difficult, particularly in the current financial climate, but if your business is viable, profitable and sustainable, you may stand a good chance of attracting a buyer. This all depends on certain factors like current market conditions, the value of your business, the availability of potential buyers, financial regulations, interest rates on borrowing, and market trends.

To increase your chances of selling your company, your business should pose minimal risk to any potential buyer, which depends on several factors:

  • Profitability (past, present and future)
  • Brand image and reputation
  • Customer base and retention rates
  • Relevance of products and services offered
  • Potential for growth
  • Sustainability of the business

The decision to sell should not be made in haste. You must take the time to think critically and explore all of your options. Do your own research and speak to professional advisors. If you do decide to sell, discuss your options with a solicitor to ensure all legal requirements are met.

Dissolving the company

As the owner of a company, you are entitled to close your business and have it struck off the register. To apply to Companies House to have it closed, you must prove that it is solvent (able to pay its bills), it hasn’t traded for at least 3 months, and all bills and debts have been paid.

As part of this process, you will be required to inform all relevant parties associated with your company that you are planning to close. You should contact HMRC to pay any remaining tax liabilities, and you should file annual accounts and a Company Tax Return. If there is any capital left over after the payment of all bills and liabilities, this is yours to keep.

The closure of the company will be advertised by Companies House in your local Gazette. This is to ensure no objections are raised by any third parties. All being well, it will be stuck off and closed within 3 months.

By Chris Tapley, Content Writer for 1st Formations.