Law guide: Business start-up

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Removing and disqualifying

Removing and disqualifying

Removing directors

The shareholders, or 'members', can remove a director by ordinary resolution at a general meeting. Nothing in the director's contract can take away this right. A director can't be removed by written resolution (see Shareholder meetings for more information on resolutions).

In order to remove a director, the member wishing to do so must give 'special notice' to the company at least 28 clear days before a general meeting. The special notice is a formal notice setting out the request. The company must then immediately send this notice to the director concerned. The directors should call a general meeting for the members to vote on the removal, giving all the members notice of the resolution as well as notice of the meeting. If the member wishes to appoint a replacement director, the member should also give special notice of this to the company.

The director has the right to speak at the meeting. They can also make written representations to the company and ask the company to forward them to the members. If the director does ask, the company must forward the representations with the notice of the meeting to all the members. In any case, the company must state in the notice of the resolution to be passed at the meeting that the director has made representations.

If a copy of the representations isn't sent because it's received too late or because of the company's fault, the director can ask that the representations be read out at the meeting.

However, copies of the representations don't need to be sent out or read out at the meeting if the Court agrees to this.

Disqualifying directors

The courts have the power to make orders disqualifying company directors. The Secretary of State, or in Northern Ireland the Department for the Economy, can also accept 'disqualification undertakings' from directors. This means directors voluntarily disqualify themselves, but a court doesn't get involved.

The reason for these orders is to maintain the integrity of the business environment. Directors of limited companies should carry out their duties with adequate skill and care and with proper regard to the interests of the company's creditors and employees. Disqualification applies not just to directors who are formally appointed, but also to those who carry out the functions of directors.

A director can be disqualified (among other things) for:

  • Not preparing and filing accounts
  • Not keeping proper accounting records
  • Not sending returns to Companies House
  • Allowing the company to trade while insolvent
  • Not sending company tax returns and paying tax

The minimum period of disqualification is 2 years, and the maximum 15 years.

If a director is disqualified, they'll be unable to do the following:

  • be a director of a company;
  • directly or indirectly be concerned or take part in promoting, forming or managing a company; or
  • be a member of or be concerned or take part in promoting, forming or managing a limited liability partnership.

However, the disqualified director will be able to do the above if they have permission from the court.

If a disqualified director breaches the terms of a disqualification order or disqualification undertaking, they'll be committing a criminal offence. They may also be held personally liable for any debts the company incurs while they're involved in managing that company.

A disqualified person can apply to the court for permission to act as a director or be involved in managing a company while disqualified. The court might grant permission if there are adequate safeguards put in place to protect the public interest.

The courts in England and Wales, Scotland, and Northern Ireland will tell the Registrar of Companies of every disqualification order and undertaking. This information goes onto a public Register of Disqualified Directors. A person's name is removed from the register at the end of the disqualification period.

Termination of director's appointment

The articles of association (the company's set of rules) can set out circumstances automatically ending a director's appointment.

The standard, or 'default', model articles, for example, state that a person will no longer be a director as soon as:

  • they resign from office
  • they're disqualified or prevented for some other legal reason from being a director
  • they're made bankrupt or enter into an agreement with their creditors to avoid bankruptcy
  • a doctor has given an opinion that they're physically or mentally incapable of acting as a director and might remain so for more than 3 months

Related services

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  • Shareholders agreement
    Compatible region(s): England Wales

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