Directors Dismissal

A director that is causing disruption within a business, fails to adopt the strategies the majority of the company’s management works towards or is simply under-performing, is often a serious concern for a company’s directors and/or the shareholders of a company. There may be no alternative option for the company other than to seek the removal of such a director.

The power to remove a director is often contained in a company’s articles of association. That power is granted to the board of directors or to a majority of the shareholders. Shareholders also have a statutory right, contained in the Companies Act 2006, to remove a director by passing an ordinary resolution.

In both cases, removal is subject to any rights and protections a director may have under any contract of employment or service agreement. If a removal of a director constitutes a breach of contract, there may be payments due to that director upon removal.

The removal of a director is often not without cost to the company, there is much legislation in place with regard to the potential dismissal of an employee. This means that the removal of a director may lead to a termination of an employment contract (depending on the circumstances) and this means that there may potentially be a claim for unfair dismissal or a claim under other relevant employment law.