Rules To Remove a Company Director

Your company is limited by guarantee. You want to get rid of one of your directors, but you can't get them to resign voluntarily. What do you do?

You're faced with the same problem if remove a company director won't cooperate in winding up the company when it's necessary for its survival. How can you make sure they go?

There are two main cases in which it will be necessary to force a director out:

First, they may have put their own property within the company assets (for example property held in trust for them or perhaps property bought with loaned money). In this case they are interfering with your right as liquidator/administrator to sell that property and distribute the proceeds among the creditors.

The second case where you may need to force a director out is if they are holding the company back from taking key decisions that need to be made (such as whether or not to accept an offer of settlement in a big damages claim), because they want the company (or themselves personally) to continue with litigation. If you've such a situation, you can get an injunction against them preventing them from attending meetings and communicating with the other directors prior to the meeting so that important decisions can be taken without their interference. You'll usually get such an order on terms known as 'interdict' and 'Norwich Pharmacal Order'.

An example:

Mr X has borrowed £10,000 from his Ltd Co and bought land worth £20,000 with it. Once the company goes into liquidation/administration he will try to make sure the property is sold for as much money as possible. He can do this by attending key company meetings and trying to influence other directors not to accept offers of settlement in a damages claim where the terms are very low, but keep fighting which will result in an even smaller overall payment for creditors. You need to stop him from doing that so you apply for an injunction on terms known as 'interdict' and' Norwich Pharmacal Order'.

Where there's no such interference...

But what if there's nothing like this going on? Are you stuck? No:

1: Check your Articles of Association (AoA). If they allow it, you can pass a special resolution removing the remove a company director in question. Your members may be more willing to vote for this if they know that it will release them from any liability for things done by the director since they ceased to hold office (note however that under s 172 CA 2006, this rule doesn't apply if the act in question was one of gross misconduct).

2: If your AoA doesn't allow you to pass such a resolution, or say nothing about who can remove a director, you appoint an Extraordinary Resolution at a General Meeting. The only people entitled to attend and vote are members of your company (including former members). You must give 14 days' notice of the meeting stating the reason why a new director is needed, in this case.

The special resolution is passed by the absolute majority of members in number and value (so more than 50% in both). The General Meeting must be held within three months of the director ceasing to hold office (unless it's at a time when an annual general meeting would otherwise have been held). company registration in Australia A director removed under either of these provisions is disqualified from being reappointed or re-elected for five years after leaving office.

3: If your AoA don't allow you to pass such a resolution but do say who can remove a director, you obtain consent from each member entitled to attend and vote at the General Meeting, which can extend to directors whose terms are due to expire soon. You give 14 days' notice of the meeting, state your intention to remove the director at the meeting and refer to this provision of your AoA.

The special resolution is passed by a simple majority in number, i.e. more than 50% but less than 75% of those attending and voting. company registration in Australia The General Meeting must be held within three months of the director ceasing to hold office (unless it's at a time when an annual general meeting would otherwise have been held). A director removed under this provision is disqualified from being reappointed or re-elected for five years after leaving office.