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Posted: July 1st, 2022
Removing a Director of a Company
Removing a Director of a Company
Topic:
Company law presentation
You will be asked to deliver a 12-15 minute oral presentation to a group of shareholders on the following scenario: please write it in a very simple and concise way so that I can able to make the presentation with ease.
Alison, Barbara, and Charlotte are all members of ABC Ltd. They are also all directors of the company.
Alison and Barbara have heard rumours that Charlotte is also a major shareholder in a rival company, DEF Ltd. Alison and Barbara are concerned that because Charlotte is also a director of ABC Ltd, that she has access to commercially sensitive information about the company’s forthcoming new range of products which have been in development for the past 18 months and which, if shared with DEF Ltd, could provide the other company with an unfair advantage in the marketplace. As such:
(i) Alison and Barbara want to know whether they can remove Charlotte as a director of the company and the process that needs to be followed;
(ii) They want to know if they need to get proof that these rumours of true; and
(iii) They wish to alter the articles of association of ABC Ltd in order to require any member competing with ABC Ltd, to sell their shares to any person or persons named by the directors of the company, or to the directors themselves.
As such, your argument outline should contain all of the relevant points necessary to deliver your final presentation.
Remember these are ordinary business people. Whilst you will need to include reference to the Companies Act 2006 and associated case law, it should have a practical focus rather than being a presentation of academic theory.
As such, your argument outline should contain all of the relevant points necessary to deliver your final presentation. Remember this is to a group of shareholders. Whilst you will need to include reference to the Companies Act 2006 and associated case law, it should have a practical focus rather than being a presentation of academic theory.
Removing a Director of a Company
The day to day functions of a limited company is overseen by a director or, in some cases, more than one director. In the event of dissatisfaction of the roles of one of the directors, the shareholders who can also be the directors of the company have the right to remove a director by passing an ordinary resolution, or under the article of association and removal by disqualification, depending on nature and contract breach. The appointment and removal of directors are governed by the provisions of the company act and the article of association. This discourse seeks to expound on the process of removal of a director of a public limited company.
With a particular focus on ABC ltd, Alison, Barbara and Charlotte are all company directors. However, Alison and Barbara are dissatisfied with the leadership of charlotte. Removing Charlotte entails following a stipulated decorum. Firstly, understanding and adhering to the provisions of the Companies Act of 2006 provides the guidelines of both election and removal of a director in a limited company. Secondly, the Article of Associations of the company plays an imperative role in determining the process f removal of a director. The shareholders’ agreement also entails the company’s obligations that might have been excluded by the company Act or Article of association and was deemed necessary to part of the company formulation.
After the assessments of the provisions, and statutory procedures of the company Act, the directors, should draft a notice to the other shareholders call a general meeting to vote on the proposed resolution, at least 28 days before the date of the general meeting. Additionally, Charlotte must be informed of the general meeting, whereby she will decide whether to have a written representation before the company’s general meeting. At the company, she will be interrogated o the matter in question deeming for her removal. This will be followed suit by casting a vote for or against the proposed resolution. For the case of Charlotte, the most probable means of removal is through an ordinary resolution.
However, Alison and Barbara need to obtain proof of charlotte’s involvement in DEF Ltd. This is imperative to avoid wrongful accusations of Charlotte, which could lead to legal implications. Removal of a director must be based on factual evidence rather than invalidated rumors before they call for a meeting; they need to have a compilation of proof of Charlotte’s contracts breach by working closely with their rivals. The accusation should be justifiable to affect the performance of the company necessarily.
The article of association regulates the day to day running of a company; it is; however it is not cast in stone; thus, each company has a right to amend the company’s articles of association to incorporate rules and regulations they seem fit to regulate the company. Alison’s and Barbara’s wish to alter ABC Ltd’s article of association to accommodate the provision that any competing member of the company sells their shares to other members of the directors themselves. Before the amendments are made, they will need to obtain shareholder approval by notifying them of the proposed changes.
Conclusion
Removing the director of the company from the office can be a very difficult task with many legal considerations; thus, it is essential to understand the provisions of articles of association and the companies Act 2006 before invoking procedures. It is also important to seek legal advice before invoking any procedure to deal with a dissenting director to ensure that the proper protocol is complied with to combat necessary potential pitfalls.
References
Cassim, R., 2019. An analysis of directors’ fiduciary duties in the removal of a director from office. Stellenbosch Law Review, 30(2), pp.212-233.
Ede, C. (2020). The 2019 Bill for the Amendment of the Companies and Allied Matters Act (CAMA) Lfn, 2004: Quo Vadis. Quo Vadis (April 17, 2020).
Lim, M. H. K. (2018). Company Law, Removal of a Director under S. 184 Companies Act 1948 (England). Journal of Malaysian and Comparative Law, 3(2), 310-314
Malokane, M. (2019). Removal of directors: does it constitute dismissal under the Labour Relations Act?: employment law. Without Prejudice, 19(3), 15-16.
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