Removal of a Director
In recent years we have seen a number of high profile companies at which resolutions have been put forward by shareholders to remove directors from the board. We have also seen a noticeable increase in queries and engagements to remove directors from SME companies. There are various reasons for this mainly due to marital disputes but also because an LTD may have just one director the ability to remove one director is a driving force behind this activity.
There are many ways in which a director can cease to hold office as a director of a company. However before a director resigns or is removed the director must continue to act in the best interests of the company.
The various ways in which a director can cease to hold office (Sec 148) include:-
- Resign in writing as a director
- Removed as a director by the members
- Retired at the AGM and not re-elected
- Disqualified from acting in accordance with the Companies Act or the constitution (bankrupt, health of the director, imprisonment of director)
- Director is disqualified or restricted by the High Court
Removal of a director
This article will focus on the removal of a director by the members of the company. Section 146 of the Companies Act 2014 provides a company may by ordinary resolution remove a director before the expiration of his period of office notwithstanding anything in its constitution or in any agreement between it and him. However, a director holding office for life as set out in the company’s constitution can only be removed if the correct procedure for the alteration of the constitution is followed.
Before commencing this process, I would strongly advise the company take appropriate legal and employment law advice as the removed director may have contractual or employment rights. The removed director may take wrongful or unfair dismissal proceedings. Also removing the person as a director does not remove them as a shareholder and the company must be mindful of any oppression of the shareholders’ interests.
Procedure
- The member(s) must give extended notice of at least 28 days’ notice to the company that an Ordinary Resolution is to be proposed at an Extraordinary General Meeting.
- On receipt of the notice the Company must send a copy of the notice to the relevant director
- A board meeting should be held to convene the EGM and give 21 days’ notice to its members of the meeting at which the resolution is to be proposed.
- The relevant director may make written representation to the company and request that this representation be communicated to the members.
- The board may also make representation to the members on whether the board support or dis-agree with the proposed resolution
- The relevant director is entitled to speak at the EGM
- A vacancy created by the removal of a director can be filled at the EGM or can be subsequently filled by the board of directors
- If the ordinary resolution is passed at the EGM, a form B10 should be filed at the CRO and the statutory register written up to date and headed paper updated.
Single Member Company
A sole shareholder may remove a director by written resolution and without the absence of holding an EGM however the sole shareholder shall give procedural fairness to the removal of the relevant director.
If you require assistance with removing a directors, please feel free to contact Conor or Amy on 059 9186776.
Please Note:
Our CLS Insights aims to bring you practical information and news on Company Law and Company Secretarial. We cover the topics that matter to your business and give practical tips and also the benefit our experiences. Please remember this article is a guide and legal advice should always be obtained. If you have any queries please contact one of the team and we would be happy to help.
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