Remove/Appoint Director
Remove/Appoint Director
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OVERVIEW
Both Companies Act and the Articles of a company contain rules in regard to appointing a director. Reading the articles is especially important in order to know all the requirements regarding the appointment of a director. Shareholders and Board of Directors can appoint directors. However, the rules regarding the same must be confirmed in the articles. Non-executive directors need a letter of appointment (LOA). It is a kind of contract stating the terms of appointment, also known as a service agreement. The agreement covers their employment status, office as director, and the relationship between these. Generally, the Board decides the terms of appointment. However, the law or a company’s Articles will take priority over the LOA or Service Agreement if there is a contradiction. Appointment of a director must be notified to Companies House.
DOCUMENTS REQUIRED FOR REMOVE /APPOINT DIRECTOR
Contract of employment
Senior employment contract
Loan agreement
Board minutes
Share certificate
Shareholders agreement
REMOVING A DIRECTOR
 | A company’s shareholders can always remove a director by following the procedure given in the Act. A director can exercise his rights under The LOAN or Service Contract if this happens, but he can still be removed. |
| Often, the Articles, LOAN or Service Agreement might provide some conditions, which if violated, can lead to termination of directorship. It’s important to check what these documents say about removing a director. Sometimes directors can be removed just on the basis of these documents, and a shareholder’s resolution is not required. |
| When an executive director is removed, he may have some legal rights in his capacity as an employee, such as unfair dismissal or discrimination. |
| If a company compensates a director because they are removing him, it might require approval from the shareholders. |
| A company’s Articles often require directors to retire by rotation whereby one-third of them must resign from office at the company’s general meeting and can only continue in office if re-appointed by shareholders. |
| Individuals can be disqualified from acting as a director for up to 15 years if they fail to meet their legal responsibilities or become bankrupt. |
| Removal of a director must be notified to Companies House. Additional formalities apply for public or listed companies. |
| Removing directors from office can be tricky. If you have any doubts, ask a lawyer to check you are doing everything right. |