How to remove a director

This post covers how to remove a statutory director of a company registered in England & Wales.

What is a director?

A statutory director is a formally appointed officer of the company. The director’s role as an officer is separate from any employment they may have with the company.

As a director, an individual has the power to bind the company with their decisions. It is therefore essential that you remove a director as an officer of your company in addition to terminating any employment they may have.

How to remove a director?

The simplest and most common way to remove a director is for the director to resign. However, in some circumstances it won’t be possible to remove a director by resignation. In these cases, a director’s appointment may also be terminated in a number of other ways, including:

• using a power of attorney;

• by ordinary resolution of the shareholders; and

• under the company's articles.

1. Resignation

Unless the company’s articles of association provide otherwise, a director may resign from their office at any time by providing notice to the company. It is best practice for the notice to be in writing and for it to contain a waiver of any claims the director may have against the company.

The resignation will be effective in accordance with its terms and does not need to be accepted by the company (although it is good practice for the company to acknowledge the resignation at a board meeting).

2. Removal by power of attorney

The second method is really a subset of the first but it something that is often overlooked by companies when appointing directors.

It is good practice when appointing a director to include a power of attorney in favour of the company in their employment contract. The power of attorney should give the company the ability to take actions on behalf of the director, including tendering their resignation if certain trigger events occur. Common trigger events are the termination of the director’s employment and a breach of the director’s duties. For more information on director duties, see here: [LINK].

Using a power of attorney in this way is a simple and effective way to remove a director.

3. Resolution of the shareholders

The company’s shareholders can remove a director by passing an ordinary resolution (a resolution requiring more than 50% of the shareholders to vote in favour of it). Seems simple, right?

Unfortunately it is not: there are several procedural requirements that need to be followed when removing a director in this way. If these requirements are not met, the resolution will be invalid.

Procedural requirements

• No written resolution: The resolution must be passed at a shareholder meeting (rather than as a written shareholder resolution). This is because the director has the right to speak at the meeting and make his/her case against the resolution. The requirement to hold a physical meeting is burdensome and, when combined with the special notice requirement below, means that this is a very slow method of removing a director.

• Special notice: The shareholder proposing to remove the director must notify the company at least 28 clear days before the meeting. The company must forward this notice to the director.

• Right to make representations: The director must have a right to represent themselves to the company’s shareholders. This is effectively a right for the director to explain themselves and defend their position before the shareholders vote. If the director provides written representations to the company in respect of the resolution, the company must, unless the representations are received by it too late for it to do so, state that representations have been made in the notice of the resolution and send a copy of the representations to the shareholders.

4. Under the company’s articles

Most articles (including the model articles) set out scenarios in which a director will automatically vacate their office, for example if they become bankrupt or mentally ill. No board resolution is required to confirm the vacation, but it is good practice to note that the director has vacated their position at a board meeting.