FAQs: Termination of Director

Can I remove a Director from my Company?

Directors of a company are appointed by the shareholders of the company or by the guarantors. The appointment and the duties of such directors are set out by the Companies Act 2006. If for some reason, the shareholders or the members of the company feel that a director should be removed, they can do so by removing the directors as per the rules and regulations spelled out by the Companies Act.

Furthermore, while terminating a director before their tenure, the members and the shareholders should keep in mind that such termination should not conflict with the articles of association (AOA) of the company or with the Companies Act 2006.

How can Directors be removed?

When a company’s members and shareholders wish to terminate or remove a director before the director’s tenure is up, the termination can be done in the following manner:

1. According to the provisions set out by the articles of association (AOA) of the company,
2. Through an ordinary resolution passed by the members of the company, or
3. Through an order of disqualification made by an authorized body.

How to remove a director according to the AOA?

The AOA of a company not only specifies the duties of the director but also spells out when a director and how the director can be removed from office.

1. The said director is prohibited from functioning as a director as per the provisions of the AOA or cannot function as the director as per what is mentioned in the articles.
2. An order of bankruptcy is made against such a person.
3. When a registered medical practitioner, who has been treating the director, gives in writing that the said person has become incapable of handling the responsibilities of a director.
4. Other than this, a director can be terminated if such a person is physically incapable of handling their job as a director for at least three months.
5. A composition is signed with the creditors of the director.
6. After the company receives an official notification from the director that such person is resigning from their office.

The AOA of every company is made with different provisions. The above-mentioned provisions are generic and may differ from every company’s AOA. While terminating a director from their office, you need to make sure that such termination is in-line with the specifications of the AOA.

How do you remove a director by ordinary resolution?

If the AOA of the company does not cover the grounds for termination or dismissal, the company may terminate the director by way of ordinary resolution. For this, the person who proposes that a certain director may be terminated, such member should send a notice to the other members of the company, including all the directors at least 28 days prior to the meeting.

Furthermore, during this ordinary meeting, the company’s members will vote. If the resolution is passed by 55% of the voting share or more, then the said director will be removed from office. During this ordinary resolution, the members and the board of directors will meet at the meeting point. The director who is to be removed will also attend the meeting and will get a chance to make their own representation before the voting commences.

The votes will decide whether the director should be removed or not. Additionally, all the minutes of the meeting will be recorded and a copy of the same will be kept at the registered office of the company.

Apart from this, the company’s register of the statutory directors should be updated after the meeting. Furthermore, should the director be terminated or removed from office, the Company House should be notified of such change within 14 days from such ordinary resolution being passed. This kind of notification to the Company House can be made through Form TM01 or via Rapid Formations free Admin Portal.

Also Read: Change of Director – Form CH01

How is a director disqualified by an authorizing body?

The third way of removing a director is by an order made by an authorizing body. This termination can be done by any one of the following bodies:

• Companies House
• The Insolvency Service
• A company insolvency partner
• The Competition and Markets Authority (CMA)
• The courts

What is included in The Insolvency Service?

• Continuing trade with creditors when the company was not in a position to pay the debts owed.
• Failing to keep proper accounting records for the company.
• Failing to file and keep the annual accounts and submit the same to the Company House.
• Failing to pay tax returns.
• Fails to cooperate with the Insolvency Practitioner or Official Receiver.
• Using money or assets of the company for personal gain, use or profit.

What happens when a complaint is filed against a director?

Once the director is notified of the complaint or complaints filed against them, the said director will have three options, and they are:

• Defend themselves against the allegations made against them.
• Wait to be disqualified from office through the court.
• Voluntarily disqualify themselves to prevent any actions by or through court.

Also Read: Duties As A Director Of A Limited Company?

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.