Removing a director is a fairly straightforward process.
My last post focused on how to appoint a company director – I’ll now outline how to remove one.
A director can be removed from a company for a number of reasons. The resignation or termination must be in accordance with three things: the terms of the Companies Act 2006, the company’s articles of association, 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. 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 you should notify Companies House. The same goes if you ask a director to take voluntary resignation to avoid dismissal proceedings. This can be done online or by post using Form TM01 within 14 days of the resignation. The public register will be updated to reflect this information. The company’s statutory register of directors must be also be updated accordingly.
Removing a director 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.
Removing a director 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. This procedure is often used when shareholders are unhappy with the general performance of a 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.
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 him or her to attend the meeting and make representations. If a majority vote is achieved, Form TM01 must be filed with Companies House within 14 days of the termination.
Removing a director by the Court or other authority
If a director fails to maintain their statutory duties and responsibilities, or their conduct is deemed ‘unfit’, an official complaint can be made to the Insolvency Service. This can be made by any member of the company or the public. A 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.
Can a director be disqualified?
Yes. Removing a director by disqualification is possible if they fail to meet the legal requirements of their role. These are outlined in the Companies Act 2006 and the articles of association. 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.
Causes of director disqualification
Directors can be immediately disqualified in the following circumstances:
• Failure to 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 annual returns with Companies House.
• Failure to pay corporation tax or any other taxes.
• Using company finances or assets for personal gain or benefit.
• Failure to maintain any other statutory duties as per the Companies Act 2006
Can I resign if I am the sole director of my company?
If you wish to resign as the sole director of a company in which you own shares, you may appoint another director to run it 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.