Section 146 of CA 2014 provides the rules to be followed when a company wants to remove a director. Section 146(1) of CA 2014 makes it clear that a company may by ordinary resolution remove a director from office notwithstanding anything in the constitution or any agreement between the director and the company with one exception which is where the director holds an office for life.
Note where a director is being removed this procedure does not cover employment law nor does it affect his or her rights to compensation under the terms of the appointment. An executive director is an employee of the company, whether there is a written contract or not, and the dismissal of an executive director is governed by employment law as well as companies legislation. Therefore, if a director is removed from office and this also terminates his or her employment, the dismissal may be unfair under the Unfair Dismissals Acts. In addition if the director is also a shareholder he may bring a case for minority oppression under Section 212 Companies Act 2014. Before a decision to remove a director is made, legal advice should be obtained.
Before any resolution is passed the following steps must be followed:
- The Company must be given not less than 28 days’ notice of the intention to pass the ordinary resolution (unless the directors have resolved to submit it) – i.e. when members resolve to pass the resolution (Section 146(a) CA 2014);
- The company should then inform the affected director immediately by registered post of the intended resolution by sending a copy of the resolution in step 1 above. This notice should inform the director of the fact that:
- The director is entitled to be heard in relation to the resolution at this meeting (Section 146(b) CA 2014);
- The director is entitled to make representations in writing (not exceeding a reasonable length) and the company must then inform the members of the fact that written representation has been received by the director in the notice of the extraordinary meeting and enclose these written representation with the notice (assuming these representation are made on time – if they are not made on time then they must be read out at the meeting – Section 146(7) refers). Note written representations do not need to be sent if an application is made to the courts by any member stating that they are aggrieved and the court is satisfied that the rights conferred by this section are being abused to secure needless publicity for defamatory matter and orders that those things need not be done.
- Send notice of the proposed resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice of it, either by advertisement in a daily newspaper circulating in the district in which the registered office of the company is situated or in any other manner allowed by this Act or by the constitution, not less than 21 days before the date of the meeting (Section 181 CA 2014 refers).
- Hold a board meeting to recommend the holding of an extraordinary resolution
- Hold extraordinary general meeting and pass ordinary resolution
- If necessary at the extraordinary meeting arrange for the appointment a new director (every ‘Ltd’ must have at least one director and ‘DAC’ at least 2) or if not appoint a casual director.
- File Form B10 noting the removal of a new director and if applicable the appointment of a new director.