A company director can be appointed during company formation and at any time thereafter. Likewise, directors can resign or be removed at any point after incorporation, provided that such actions are approved by the members or existing directors; and in line with provisions in the Companies Act 2006, the articles of association, and any shareholders’ agreement and/or director’s service contract
Limited companies 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 beforehand or at the same time as the removal.
Appointing a director and Informing Companies House
The process of appointing a company director and informing Companies House is very simple. It can be done online or by post.
During the company formation process, the members (shareholders or guarantors) will decide who to appoint. In many cases, members appoint themselves as company directors.
After incorporation, director appointments need to be carried out using a formal process. For this, the director should sign a letter of consent confirming they wish to act as director for the company, and a majority of members must approve the appointment of a new company director by passing an ordinary resolution.
In many companies, the appointment of a director can also be approved by the existing board of directors.
Once the appointment has been made, you must notify Companies House and provide the following details on form AP01 Appointment of Director within 14 days:
- company name
- company registration number (CRN)
- date of appointment of new company director
- title, full forename(s) and surname, including any former name(s)
- date of birth
- residential address
- service address
If you wish to appoint a corporate director, then the process is exactly the same. However, the company that the corporate director is being appointed to must have at least one other director who is a natural person.
The following details of the corporate director must be submitted to Companies House 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
- legal form and governing law (for non-EEA corporate directors)
The 1st Formations free Online Company Manager is the quickest and easiest way to file this information online. Information is sent electronically to Companies House, and the public register is updated with the new details within 48 hours.
The company’s 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.
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 this information is not displayed on Companies House, then that may cause issues.
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 whenever a new director is appointed.
What does Companies House mean by director’s ‘occupation’?
When you appoint a company director, you will be asked to provide their ’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 company director.
Often, their occupation will form a large part of their role as a director; e.g., if they are a qualified accountant or lawyer, a sales or marketing executive, an IT specialist, an HR manager, a chartered secretary, etc.
You can, therefore, list a director’s occupation as a specific profession, if applicable. Alternatively, you can state ‘Director’ or simply leave that section of the appointment form blank.
How to change a director’s details at Companies House
With the exception of a director’s date of birth, you can change any details that have been registered at Companies House using the form CH01. In the majority of circumstances, it is very quick and easy to make such amendments through the 1st Formations free Online Company Manager.
Companies House will update these details on the public register within approximately 48 hours.
If the wrong date of birth has been registered for a director, the only way these details can be changed is by filing a replacement appointment form or, if the incorrect date was added on incorporation, through the use of the RP02A and RPCH01 forms.
Are details of company directors 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 exception of home addresses and the ‘day’ element of the director’s date of birth. However, if a company director chooses to provide a residential address as their service address, these details will be placed on public record.
How to remove a company director
A company director can be removed for a number of reasons, but the resignation or termination must be in accordance with the terms of the Companies Act 2006, the articles of association, the shareholders’ agreement (if applicable), 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.
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.
Removal under the articles of association
The model articles of association contain 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 under section 168 of the Companies Act 2006. This procedure is often used when shareholders are unhappy with the general performance of a company 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 (above 50%).
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 them to attend the meeting and make representations.
If a majority vote is achieved, Form TM01 must be filed at Companies House within 14 days of the termination.
Removal by the Court or other authority
If a company director fails to maintain their statutory duties and responsibilities, or their 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 company 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 confirmation statements
- 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 is updated accordingly within approximately 48 hours.
You may notify Companies House about a new director appointment at the same time if required.
Can a company director be disqualified?
If a director fails to meet the legal requirements of the role, as outlined in the Companies Act 2006 and the articles of association, they can be removed from the 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.
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; or being a member (partner) of 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
Company directors can be immediately disqualified in the following circumstances:
- do not 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 confirmation statement at Companies House
- failure to pay corporation tax or any other due 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 company 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
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.
Can I resign if I am the sole company director?
If you wish to resign as the sole director of a company in which you own shares, you may appoint another director to run the business 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 for you.
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 company director, the prospective director should sign a letter of consent to act, after which you should (in your position as director) resolve to appoint that person to the board.
Afterward, you must file form AP01 at Companies House. Once completed, you should now be able to resign.
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), that it hasn’t traded for at least 3 months, and that all bills and debts have been paid.
As part of the company dissolution 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 allow objections to be raised by any third parties (e.g. creditors) who may oppose the closure. All being well, it will be struck off and closed within 3 months.