Can you remove a company director without their consent?
In certain situations, you can remove a company director without their consent.
The procedures and grounds for removing a director should be detailed in the company’s articles of association. If not, you can terminate the director’s appointment through an ordinary resolution passed by the company’s members, in line with the Companies Act 2006. Additionally, the courts can disqualify a director under certain legal circumstances.
Regardless of the method used to remove a director, it’s crucial to avoid breaching employment rights or the terms of any employment contract or service agreement, as this could result in claims against the company.
In some cases, it’s advisable to seek professional legal advice before proceeding with the removal of a company director.
Remove a company director under the articles of association
When considering the removal of a company director, it’s important to start by reviewing the articles of association.
Some companies have bespoke articles that may include detailed provisions for terminating a director’s appointment. However, many companies use standard ‘model’ articles of association, which specify that a director automatically ceases to hold office under 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 include additional provisions for removing a director on various 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 none of these provisions allow for the removal of a director, company members can issue a special notice to remove the director under the Companies Act 2006. This may be necessary if the director refuses to step down, despite no longer being qualified or entitled to remain in the position.
Remove a director under the Companies Act 2006
When no easier solution is available, or if a director refuses to step down, sections 168 and 169 of the Companies Act 2006 provide a statutory process allowing members (shareholders or guarantors) to remove a director by ordinary resolution.
The procedure is as follows:
- Members intending to propose an ordinary resolution to remove a company director must provide ‘special notice’ to the company at least 28 days before the general meeting where the resolution will be voted on.
- Upon receiving 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 then give at least 14 days’ notice of the general meeting and the proposed resolution to all members and the director in question.
- At the general meeting, eligible members will cast their votes. If more than 50% (a ‘simple majority’) of the votes are in favor of removing the director, the resolution is passed.
The director facing removal can submit written representations to the company and speak at the general meeting. The board of directors can also present their views on the resolution to the members. However, only the member(s) proposing the resolution can present their case at the meeting.
If removed, the director may still receive compensation based on their contract or service agreement. Additionally, employment laws apply when dismissing a director who serves as an employee, regardless of whether a formal contract exists. This requires careful handling to avoid potential legal disputes related to employment rights.
Removing a company director who is also an employee
The procedures for removing a company director only address their role as a director within the company. If the individual also holds an employee position, their employment rights must be carefully evaluated. This helps determine whether they have grounds for an unfair dismissal claim as an employee against the company.
In such cases, seeking legal advice is crucial to navigate the situation appropriately. Additionally, if the director holds shares in the company, it’s important to address this to minimize the risk of a claim for unfair prejudice. This proactive approach helps safeguard against potential legal disputes related to both employment and shareholdings.
Notifying Companies House when you remove a director
After a director is removed, Form TM01 must be completed and filed with Companies House within 14 days. The public register will then be updated to reflect this change.
Additionally, the company must update its statutory register of directors and the register of directors’ residential addresses to reflect the date on which the individual ceased to be a director.
FAQs about Removing a Company Director without their consent
Can a company director be removed without their consent?
Yes, a director can be removed without their consent in certain situations. The process typically involves either provisions in the company’s articles of association or a statutory procedure under the Companies Act 2006.
What are the grounds for removing a director under the articles of association?
Common grounds include voluntary resignation, passing an ordinary resolution by members at a general meeting, director disqualification, bankruptcy, physical or mental incapacity, or absence from meetings. Some companies may have additional provisions in bespoke articles or shareholders’ agreements.
How can a director be removed under the Companies Act 2006?
Members must issue a special notice at least 28 days before a general meeting where a resolution will be voted on. If more than 50% of the members vote in favor, the director can be removed.
What is the notice period for removing a director?
A special notice must be given at least 28 days before the meeting. The general meeting itself must be notified at least 14 days in advance.
What rights does a director have during the removal process?
The director facing removal can submit written representations and speak at the general meeting. They also have the right to be informed of the proposed resolution.
What happens if the director is also an employee?
Employment laws apply, and the director may have grounds for an unfair dismissal claim. The company must carefully review their employment contract and legal obligations.
Do I need to notify Companies House when a director is removed?
Yes, Form TM01 must be filed with Companies House within 14 days of the removal. The statutory register of directors and residential addresses must also be updated.
Can the removed director receive compensation?
If the director has a service contract, they may be entitled to compensation. Employment rights protections also apply if they are an employee.
What should be done if the director holds shares in the company?
If the director owns shares, this should be addressed to minimize the risk of an unfair prejudice claim. Legal advice is recommended for managing shareholding disputes.
What should I do in complex removal situations?
It’s advisable to seek legal advice, especially if the director refuses to step down or if there are concerns regarding employment rights or shareholding disputes.
Do you have any other questions?
So, removing a director without their consent requires careful adherence to legal steps outlined in the company’s Articles of Association. Shareholders can initiate this by passing an ordinary resolution. However, you must notify the director and allow them to present their case at a meeting. Keeping the process straightforward and transparent helps prevent legal issues.
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