In her first article, Company & Commercial Solicitor Zoe Watson answers the question ‘How do I terminate a director of a company?’.
Zoe looks at who can remove a director, what process needs to be followed and more…
Who has the power to remove directors?
The members of a company can remove a director of a company before the expiration of their period of office.
A director can be removed even if they have an agreement with the company under Section 168 of the Companies Act 2006.
On what grounds can you remove a director?
Directors should act in accordance with their statutory and fiduciary duties, for example:
- Acting within their powers
- Acting in the company’s best interests
- Promoting the success of the company
- Avoiding any conflicts of interest
These duties are set out in Sections 171 to 177 of the Companies Act 2006.
If shareholders feel that a director is failing to act in accordance with these duties, they can take steps to remove the director in question.
What percentage of shareholders can remove a director?
When looking to remove a director under Section 168 of the Companies Act 2006, shareholders need to follow a very strict process which is as follows…
Serving notice
The members must serve special notice on the company of any resolution to remove a director.
This means that notice must be given to the company at least 28 clear days before the meeting is set to take place.
General Meeting
On receipt of the notice, the board of directors must call the general meeting to consider the proposed resolution and to circulate the notice.
Notice of the general meeting should be sent to all shareholders and to the director in question.
Director rights
The director is given the right to make written representations in response to the proposed removal.
If possible, the company should circulate these representations to the members ahead of the meeting.
The director is also entitled to make representations at the general meeting in respect of their removal.
Voting
At the meeting, once any representations have been heard, the members in attendance (and who are entitled to vote) must then vote on the resolution.
The resolution will then be passed if a simple majority (over 50%) of those shareholders vote in favour.
In the full article, Zoe looks at removing a director who is also an employee and/or shareholder, what happens when a director is removed and how to appoint a new director. Click here to read it.