Procedure for removal of a director by members under Section 146 of the Companies Act

Regardless of any provisions on removing directors in a company’s constitution, members may always remove a director from office using the procedure set out in section 146 of the Companies Act 2014 (the 2014 Act).

This procedure must be strictly observed and is quite protracted as extended notice is required to be given of the extraordinary general meeting (EGM) at which the resolution is to be proposed.

Under a company’s constitution, this procedure does not apply to a director appointed for life.

Procedure

Step 1: Give Extended Notice

The member(s) must give the company at least 28 days’ notice before the intended meeting that an ordinary resolution will be proposed at an EGM to remove a director.

Check out our Notice template to help you

Step 2: Notice must be sent to the Director concerned

Upon receipt of the notice, the company must immediately send a copy to the director concerned.

You can use our template letter to do this.

Step 3: Call an EGM

A board meeting should be held to recommend the holding of the EGM.

21 clear days’ notice of the EGM should be given to members.

This 21-day notice period can be within the 28-day notice period in Step 1.

Notice of EGM to members

Step 4: Right to representation and right to be heard

The director concerned has a right to protest against his/her removal before the general meeting is held.

The director may make representations in writing to the company, provided they are of a “reasonable length” in relation to his or her proposed removal and request that the representations be communicated to the members.

The board may also represent to the members whether the board supports or disagrees with the proposed resolution.

The relevant director is entitled to speak at the EGM

Step 5: Minutes

Minutes should be used to record the proceedings of the EGM.

Minutes – removal of director

Step 6: Notify the Companies Registration Office (CRO)

If the ordinary resolution is passed at the EGM, the CRO must be notified within 14 days of the date the director is removed.

A form B10 should be filed at the CRO, and the statutory register written up and headed paper updated.

A vacancy created by removing a director can be filled at the EGM or, if the company’s constitution allows, can be filled by the board of directors as a casual vacancy.

You can use our letter to CRO to do this

Note: Section 147 of the 2014 Act provides that the removal of a director under section 146 is without prejudice to any rights or remedies available to the director in relation to his or her removal.

Removal of a director of a single-member company

Section 196(2) of the 2014 Act provides that a sole member may remove a director by written resolution without holding an EGM.

However, any removal of a director under this section is subject not only to section 147 of the 2014 Act but also to “the requirements of procedural fairness”.

Sole member removal of director resolution

The company’s constitution

Powers may also exist in a company’s constitution to remove a director.

This includes any right for the board to remove a director by writing., for example.

You should review your constitution to see what, if anything, it allows for.

You can amend your constitution anytime to include additional and more administratively efficient methods of removing directors.

Conclusion

Where conflict between a company and one of its directors arises, often the easiest way to manage the situation is to seek to have the director resign his position voluntarily in return for a severance package if and where appropriate.

Any severance package offered to a director may require shareholder approval under the 2014 Act.

A company’s constitution, the director’s employment contract or a shareholder’s agreement may make provisions for removing a director.

However, in the absence of any such provisions and where an amicable resolution is not possible, a director may only be removed from office by the procedure set out under section 146 of the 2014 Act or where the company has only one member under section 196(2).