Resignation or removal of directors: Get the details right

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Jennifer Adams looks at the procedure by which a director leaves a company – whether that director goes on his own accord for his own reasons, is asked to leave or is forced to leave through disqualification.

The vast majority of directors leave a company amicably through resignation rather than being forced to leave but they may have no choice is disqualified (for detail on disqualification of directors see the article Directors Disqualification: Get the details right.

Method of resignation

Whatever the reasons for leaving, there should be a set procedure in place to cover both the company and the relevant director. Ideally there will be a directors' service contract containing the necessary provisions, inter alia, any notice period, the agreement that the resigning director be required to sell any shares held on resignation and an obligation to resign as a director upon any termination of employment. If it is wished that the resigning director remains an employee after resignation, then that can also be included in the contract.

In small private limited companies invariably there will be no director's service contract and unless specific provisions can be found in the company's Articles requiring the director to give a period of notice, a director may resign at any time just by giving notice to the company. Ideally, the notice should be in writing, but this is not specifically required under the Companies Act 2006.

Whilst now relatively unusual, in some cases a company’s Articles can require the board to formally approve any director resignation but the usual procedure is for the leaving director just to give notice in writing and leave after a set notice period.

Model Articles Clause 18 states that "a person ceases to be a director as soon as…

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  • Forced removals
  • Practicalities of removal by ordinary resolution with special notice
  • Bushell v Faith clause
  • Alternative to s168 CA 2006
  • The practicalities following a resignation
  • When all directors resign

Although no board resolution is technically required upon a director resigning, it is good practice to record that the resignation has occurred at the next directors' board meeting. 

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About Jennifer Adams

Jennifer Adams

Jennifer Adams is Consulting Editor of AccountingWEB and is a professional business author specialising in corporate governance and taxation. She runs her own accounting and consultancy business with offices based in Surrey and Dorset.

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26th Jul 2017 20:29

A question: if an AGM or General meeting was called at which it was intended to remove a director, if that director simply chose not to turn up at the meeting, can that director still be removed?

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to Andrew Bean
29th Jul 2017 23:36

Andrew Bean wrote:

A question: if an AGM or General meeting was called at which it was intended to remove a director, if that director simply chose not to turn up at the meeting, can that director still be removed?


Refer to Part 10 (particularly s 168 & 169) of Companies Act 2006. Make sure proper notice is given. By all means consider any Shareholders'Agreements but remember they cannot override company law. Repeated failure to turn up to Directors' meetings is a breach of fiduciary duties. Simply apply the force of law. If in doubt refer to the Companies Act; when they argue, refer to the Companies Act; did I mention- refer to the Companies Act.
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08th Aug 2017 13:54

if members/ shareholders call for an e.g.m, in a private limited company club .
who decides the time and date of the meeting

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to peter conlin
08th Aug 2017 15:27

peter conlin wrote:

if members/ shareholders call for an e.g.m, in a private limited company club .
who decides the time and date of the meeting

The directors call the meeting; members can require the directors to call a meeting - the directors call the meeting. As mentioned above - refer to the Companies Act (Chapter 3) - it tells you all you need to know.

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24th Oct 2017 15:54

Question: my ex husband I were equal shareholders in a limited company and both directors. Separation prompted me to leave the matrimonial home. Ex husband “resigned” me as a director through our Accountants without my knowledge or consent. Is this lawful in light of us being equal at all levels in the business? Please advise.. thanks

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16th Dec 2017 19:48

Hi, I have been a sole director for 7 yrs for the same company name only due to the owner being struck off the register and to save the company and its employers I become director over night - I have had no financial input or output . It is a limited company held by shares his wife . He was not to have any financial connections with the practices whatsoever - I have opened up 6 practices over the past few years - He and his wife who are now separated are fighting for the practices , she being the share holder - I don't know who to trust -He has been very disloyal to me and have verbally abused me and used my good name over the years - I have sided with his wife - he has taken me off as director without my consent - he has appointed a young nurse as director who has only qualified this year - He has sent me a termination email and he has also sent me a lawyer letter - Dental surgery vs Ms Ferrier - I am so distraught about the whole situation - our defence lawyer for the practices says that he can't remove me without me signing- can he remove me without my signature - I know over the years he has signed my signature . I am assuming removal was done electronically but is there a procedure he is supposed to follow or require my consent or signature to terminate me?:| Any advice would be much appreciated. Thanks.

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24th Oct 2018 19:29

One year ago my business partner decided to cash some funds from the bank and leave one of our companies without notice. We were both 50/50 shareholders and both directors. A year later and now closing the company, I noticed he removed himself as a director last year and never communicated about this. Can he do that? The company has many financial responsibilities and I am the sole director now... Please help!

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24th Oct 2018 19:30

One year ago my business partner decided to cash some funds from the bank and leave one of our companies without notice. We were both 50/50 shareholders and both directors. A year later and now closing the company, I noticed he removed himself as a director last year and never communicated about this. Can he do that? The company has many financial responsibilities and I am the sole director now... Please help!

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08th Dec 2018 21:50

What if no notice of intention to the company was given proposing the resolution for Special notice.
Only to be removed as a Director whilst on holiday with no prior knowledge.
What would be my options?

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21st Jan 2019 16:09

Hi, a question: I'm a 50% shareholder of a limited company and a director. I have a dispute with the other 50% shareholder (non-director) on grounds of embezzlement of company assets. This shareholder has resigned as a director a year ago. Now the company has two directors who would like to remove this person.

I have not taken this person to the court yet, because we are in the process of negotiations to return the money and depart amicably - which is not going well.

Meanwhile, I would like to remove this person from the signatory mandate of the bank. I would not like to notify the bank about the dispute because then they will freeze the account until the resolution.

I would also like to remove him as a shareholder.

Please advise.

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to Ama Polo
21st Jan 2019 17:01

Ask it as a new question/thread - you are more likely to get a proper response.
Dave

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