Under certain circumstances, you can remove a company director without their consent.
The grounds and procedures for terminating a director’s appointment should be set out in provisions within the articles of association. Otherwise, their appointment can be terminated by ordinary resolution of the members, in accordance with the Companies Act 2006, or by disqualification through the courts.
Whichever means of removal is used, care must be taken to avoid breaching employment rights or the terms of any employment contract or service agreement, which could lead to claims against the company.
In some cases, professional legal advice should be sought before taking steps to remove a company director from their role.
Remove a company director under the articles of association
When seeking to remove a company director, referring to the articles of association is a good starting point.
Some companies have bespoke articles, which may include wide-ranging provisions for terminating a director’s appointment. But many companies adopt standard ‘model’ articles of association, which state that a person automatically ceases to be a director in the following circumstances:
- They voluntarily resign
- An ordinary resolution of the company’s members is passed at a general meeting
- Upon director disqualification for breaching their duties and being deemed ‘unfit’ for office
- A bankruptcy order or Debt Relief Order is made against the director
- They enter into a composition order with creditors
- A registered medical practitioner who is treating the director states in writing that the individual is physically or mentally incapable of continuing to carry out their duties
Bespoke articles and shareholders’ agreements may make provision for the removal of a director on other grounds, such as:
- Retirement by rotation
- Retirement by a certain age
- A fixed-term appointment
- Failing to take up a required share qualification
- Being absent from board meetings for a specified period of time
If removal is not possible or practicable by any of these provisions, the company members can serve special notice to remove a director under the provisions of the Companies Act 2006. For example, if the director refuses to leave, despite no longer being qualified or entitled to remain in the post.
Remove a director under the Companies Act 2006
When no simpler option is available and/or a director refuses to step aside, the Companies Act 2006 (sections 168 and 169) provides a statutory mechanism for members (shareholders or guarantors) to remove a director by ordinary resolution.
The procedure is as follows:
- Members wishing to propose an ordinary resolution to remove a company director must give ‘special notice’ to the company. This should be given at least 28 days before the general meeting at which the resolution is to be voted on
- Upon receipt of the notice, the board of directors must call a general meeting and send a copy of the proposed resolution to the director in question
- The board must give at least 14 days’ notice of the general meeting and proposed resolution to all members and the director in question
- Eligible members will cast their votes at the general meeting. If more than 50% (a ‘simple majority’) of the votes are in favour of removing the director, the resolution is passed
The director to be removed has the right to make written representations to the company and speak at the general meeting. The board of directors is also entitled to make representations to members with regard to their position on the resolution. However, the member(s) who proposed the resolution can only make representations at the meeting.
Depending on their contract or service agreement, a director may still be entitled to compensation when removed from office. Moreover, employment law also applies when removing a director who is an employee of the company, regardless of whether or not there is a written contract.
Removing a company director who is also an employee
The procedures to remove a company director only deal with a person’s position as a director in a company. If the person is also an employee, their employment rights will need to be considered to determine whether or not they have grounds for making a claim against the company for unfair dismissal as an employee.
In such instances, it is important to seek legal advice on the matter. Similarly, if the director has shareholdings in the company, this may also need to be addressed to mitigate the potential for any claim of unfair prejudice being raised.
Notifying Companies House when you remove a director
Once a director has been removed, form TM01 must be completed and filed at Companies House within 14 days of this event. The public register will then be updated accordingly.
Finally, the company must also update its statutory register of directors and register of directors’ residential addresses with the date on which the person ceased being a director of the company.
So there you have it…
We have covered removing a company director under the articles and the Companies Act 2006. We have also discussed the removal of a director who is also an employee and how to notify Companies House.
We hope you have found this article of interest. If you have any questions, please leave them in the comments section below and we will get right back to you!