The Companies Act 2006 sets out a mechanism by which all English companies can terminate the appointment of a Company Director. This is called a statutory procedure. However, there are some things you must consider before doing so.
Firstly, you must check the Company’s Articles of Association and any other key documents which you may have such as a Director’s Service Agreement or Shareholders Agreement. If these documents do not contain a set process to remove the Director, then you will need to follow the statutory procedure as prescribed by the Companies Act 2006.
Next, a valid shareholder meeting must be called and held and a resolution in favour of terminating the appointment of the Director must be passed. If the correct procedure to call the meeting of the shareholders is not followed, the resolution to remove the Director is likely to be invalid.
However, even if you follow the procedure under the Companies Act 2006 to terminate the appointment of a Director, it does not automatically mean that the termination is free from consequence.
There are a number of other considerations to take into account, depending on whether the Director is also an employee or a shareholder.
If the Director is an employee of the Company, consideration also needs to be given to whether the Director has any claims under employment law.
It is also always open to a Director to resign his office voluntarily. This might be possible if you engage in negotiations to agree the Director’s exit from the Company on terms. If agreement is reached, then the parties can sign a settlement agreement to record the terms of settlement. This provides protection for both sides, so they each understand their obligations and responsibilities.
The parties may also agree the wording of a press release regarding the Director’s departure, to manage what information is released to the public or Company staff. Managing the reputational impact of a Director’s departure can be a key consideration.
Once a Director’s position is terminated, it must be notified to Companies House within 14 days of the termination.
If you are looking for advice regarding directors agreements and terminations, Farleys commercial solicitors can help. Our litigation solicitors can also assist if your company is in a dispute with the director during a termination procedure. For more information and to speak to an experienced solicitor, please call 0845 287 0939 or submit your enquiry online.