How to remove a director from a company?

If a director needs to be removed from the board for the sake of ensuring that the company remains professional, there are several options that the business can use to remove the director from the board. With this thought in mind, today, we have outlined some of the crucial things you need to know about removing an appointed director from your business; hopefully, this article will help you find the optimal solutions for your own business, too.

How to Remove a Director From a Company?

Knowing how to get started with removing a company director is challenging, there’s no doubt about that. With this thought in mind, before you begin looking at this process, considering how to remove a director from a company could be well worthwhile.

Well, in order to remove a director from the company, the business will need to follow the resolutions set out in the Companies Act 2006, sections 168/169. Before a director can be removed, the shareholder proposing the motion must first provide a special notice containing this decision’s relevant information to both the company and the director in question. After doing so, the company will call a general meeting of the shareholders 28 days time or later from the time of the notice being made, which will allow the company’s board to assess the motion.

Based on the Articles of Association, the ability to remove a director falls to a majority vote from the board of directors or the company’s shareholders. If such a vote passes to remove the director in question, written notice must be provided to the director for them to read.

In cases where the articles of association do not cover the removal of a director, the busisness’s shareholders will still be able to remove a director with a 50% ordinary resolution passed at the company’s next general meeting.

Why Remove a Director From a Company?

So, you now know how to remove a company director – but why might you want to do this? There are countless potential reasons to remove a director from the office of a company. Some of the most common reasons to remove a director include:

• Poor performance statistics or results
• Distrust in the director’s suitability
• The director’s presence brings the company into disrepute

In some cases, the board of shareholders may decide to still remove a director without a specific reason for doing so. As such, under the Companies Act 2006, this is still possible if there is no reason specifically to remove a director. However, at the general meeting, the company director has the right to represent themselves and their case, so if no reason is presented, the director may not be able to thoroughly

Who Can Remove a Director From a Company?

It’s not always clear at the outset who is entitled to remove a director from a company. 

The simplest answer here is that the shareholders of the company or the board of directors can remove a director from the business.

However, it’s not just a case of deciding and kicking the director out! In order to do so, the business will typically need to call a general meeting of the shareholders to officially vote on the resolution. Furthermore, it is important to consider that removing a director from a company does not necessarily remove any shares or property they own, although often, the shareholders’ agreement might state that any shares should be listed for sale following the removal of the director.

Is it Easy to Remove a Director From a Company?

By now, you might be wondering: is it easy to remove a director from a company? 

There’s certainly a lot to think about, and removing a company director is not necessarily a quick or straightforward process, since there are numerous stages involved. 

The process of removing a director begins with a shareholder making it known to the business board that they will propose the removal of the director. Thereafter, the shareholders or directors must arrange for a general meeting to be held no fewer than 28 days after the notice but within three months.

At the general meeting, the director has the opportunity to make their case, which the shareholders and directors must receive. Then the person making the motion, along with the other shareholders or directors of the business, must vote on the proposed resolution. If the vote is passed, usually by a majority of over 50% (depending on the requirements outlined in the Articles of Association), the director can then be removed. 

Companies House will need to be notified of the removal using the relevant form, ideally digitally (although paper copies can also be sent) and any tax liabilities must be fully paid off.

Once the director has been removed, the appointment process for a new director can begin. In many cases, finding a new director for employment in the business can be a time-consuming process.

Can a Director Contest Being Removed from a Company?

If a director has been forcibly removed from a company, it is possible for them to contest this decision. Directors can appeal the decision if they feel the dismissal was unfair, especially if it breached a service contract.

How Can a Director Contest a Resolution Calling for their Removal?

If a director has received a resolution calling for removal, they should still receive the opportunity to contest the resolution and make their case at the general meeting. However, if the director is still removed, they may be able to contest the decision on the grounds of unfair or wrongful dismissal.  This may end up going to Court, depending on the case.

Final Thoughts

If you’ve been looking for ways to remove a director from a company, you will need to ensure that you comply with the law at all times. Furthermore, it’s important to keep in mind that once a director has been removed, the process may not be over, as you may need to appoint new corporate directors to ensure the smooth running of the business and its services accordingly.

As such, before you begin looking into the process of removing a director, it’s valuable to get professional advice to ensure this is the right option for your business.