Can You Remove a Non-Executive Director?
John G. Courtney
CEO, Boardroom Advisors | 200 fractional C-Suite experts in Managing, Finance, Marketing, Sales, IT, HR, Operations plus NEDs, Mentors, Coaches “National Professional Services Company of the Year” Business Masters Awards
Removing a non-executive director from a company is a significant decision that requires careful consideration and adherence to legal procedures. Whether it's due to performance issues, conflicts of interest, or strategic reasons, understanding the process is crucial to ensure a smooth and lawful removal.
In this guide, we will explore various methods of removing a non-executive director, including voluntary resignation, removal by ordinary resolution, court orders, and disqualification. By following the correct procedures and fulfilling legal obligations, you can effectively remove a non-executive director from your company and protect its best interests.
Key Takeaways:
How to Remove a Director by Voluntary Resignation
Provided that the company's articles don't say otherwise, a non-executive director can voluntarily resign by notifying the company and their co-directors. To ensure the resignation is valid and effective, it is crucial to follow the articles closely. This includes adhering to any notice period requirements and properly documenting the resignation.
Resigning as a director can be a straightforward process, but it is important to be aware of any potential compensation or damages that may still be owed to the resigning director. The company should review any contractual agreements or severance provisions that may apply in such circumstances.
How to Remove a Director by Ordinary Resolution
A director can be removed before the end of their term of office by passing an ordinary resolution. This process allows the company's members or shareholders to collectively make the decision to remove a director.
In order to initiate the removal, special notice of the proposed resolution must be sent to the director and other members. This gives them advance notice that their removal will be discussed and allows them the opportunity to respond.
The resolution to remove the director must be passed at a meeting of the company. It cannot be done through a written resolution. This ensures that all members have an equal opportunity to discuss and vote on the matter.
During the meeting, the director has the right to respond and make written representations to the company and its members. This gives them a chance to present their case or address any concerns that have been raised regarding their performance or conduct.
Ultimately, the decision to remove the director rests with the members or shareholders, and it is important to follow the proper procedures outlined in the company's articles of association.
Steps to Remove a Director by Ordinary Resolution
By following these steps and adhering to the proper procedures, a director can be removed from their position through an ordinary resolution passed by the company's members or shareholders.
Removing a Director Through Court Order or Disqualification
A director's appointment can be terminated through various means, including court orders and disqualification measures. In cases of misconduct or incompetence, a court can issue a disqualification order against a director for up to 15 years.
Directors have general duties to the company, and they can be held liable for any breaches of these duties. Therefore, it is crucial for directors to understand and fulfil their responsibilities to avoid facing adverse legal consequences.
If a director is disqualified, they are prohibited from holding office in any other company, effectively limiting their ability to take up directorial roles elsewhere.
Conclusion
Removing a non-executive director from a company can be achieved by following the company's articles of association or through an ordinary resolution. Voluntary resignation is also a viable option. In some cases, court orders or disqualification may result in the termination of a director's appointment. It is crucial for directors to understand their legal duties and potential liabilities as they can be held accountable for any breaches.
Compliance with legal requirements is essential throughout the removal process, and it is important to notify Companies House of any changes in directorship. Whether it is through internal procedures, resolutions, or court involvement, the removal of a non-executive director should be handled with diligence and in accordance with the established guidelines.
By carefully following the appropriate channels and adhering to legal obligations, a company can effectively remove a non-executive director and ensure the smooth functioning of its board and corporate governance.
For further guidance, get in touch via the contact form to see how Boardroom Advisors can help you.
FAQ
Can a company remove a Non-Executive Director?
Yes, a company can remove a Non-Executive Director through a resolution passed by the board of directors or shareholders.
What is the process to remove a company director?
The Companies Act 2006 provides guidelines on how a company can remove a director. Typically, a resolution to remove a director needs to be passed by the board of directors or shareholders.
How can a director without executive responsibilities be removed from office?
A director without executive responsibilities can be removed from office by following the procedures outlined in the company's articles of association and the Companies Act 2006.
How long does a company have to notify Companies House after a director stops being a director?
A company must notify Companies House of a director's removal within at least 28 days after the director stops serving in that position.
Can shareholders appoint new directors after the removal of a director?
Yes, shareholders have the authority to appoint new directors to replace any directors who have been removed from office.
What are the legal implications of the removal of a company director?
The removal of a company director must be in accordance with the company's articles and the Companies Act 2006 to avoid any potential legal claims against the company by the removed director.
What are the key responsibilities of a board of directors in the removal process?
The board of directors is responsible for overseeing the proper removal process of a director, ensuring compliance with legal requirements, and appointing a replacement if necessary.
Originally published in boardroomadvisors.co/can-you-remove-a-non-executive-director/