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LPC Law Notes Business Law and Practice Notes

Removal Of A Director And Employee Notes

Updated Removal Of A Director And Employee Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

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The following is a more accessible plain text extract of the PDF sample above, taken from our Business Law and Practice Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Directors are officers and may also be employees (Bottrill) – so you may need to get rid of them twice.

  • D can give notice to the company at any time (MA18(f) / TA81(d))

  • Subject to their employment contracts and notice periods

Removal by Board
  • If using amended Articles, there may be a power to remove a fellow D

  • If so, Ds must act in the best interests of the company (s.172)

  • There is no default provision for this in the MA or TA

Disqualification under Articles
  • If D becomes ill or bankrupt, they are prohibited from being a D (MA18 / TA81)

  • If D is absent from meetings without permission for 6 consecutive months, the other directors can resolve to remove him by majority (TA81(e) / none in MA)

Disqualification by the Court

The court has discretion to disqualify a D for between 2 and 15 years under CDDA ’86:

  • Conviction of an indictable offence (s.2)

  • Persistent breaches of company legislation (s.3)

  • Fraud during a winding-up (s.4)

  • Summary conviction for default in filing a notice (s.5)

  • Unfit D of an insolvent company (s.6)

  • Disqualify following an investigation period (s.8)

  • Fraudulent or wrongful trading (s.10)

  • Breach of competition law (s.9A)

Re Sevenoaks Stationers Ltd outlines the tariffs: (also see ch 6.10.6 for more case law)

2 – 5 years: not a particularly serious offence

6 – 10 years: a serious offence but not meriting the top bracket

11 – 15 years: for very serious offences

Automatic by Rotation under Table A
  1. Ds must retire by rotation (TA73 / none in MA)

  2. @ 1st AGM: all Ds retire

  3. They are then automatically reappointed unless a contrary SR is passed

  4. @ subsequent AGMs: 1/3 of Ds must retire and be subject to re-election

Note: executive directors are exempt from this requirement (TA84)

Removal by Shareholders

(see flowchart)

Members’ Rights:

  • Members have the right to remove a D at any time at a GM by OR (s.168(1)) and this right cannot be removed by amending the articles

  • Cannot use WR procedure (s.288(2)(a))

  • Members must give company “special notice” (s.168(2)) and s.312(1) it must be:

    • Given 28 clear days before GM (“clear” defined in s.360 as not day of)

    • Show formal notice of intention

    • At the RO

    • [if intend to appoint a replacement, include this in the notice]

Directors’ Rights:

  • D under threat must be immediately given a copy of special notice (s.169(1))

  • D then has the right to make written representation to the members (s.169(3))

  • The D may also speak at the GM irrespective of whether he’s a member (s.169(2))

Procedure: Co-Operative Board:

  • This will only happen if a majority of the board votes in favour

  • They will respond to the s.168 by calling a GM in the usual way (s.312(2))

  • 14 clear days’ notice of the GM is required

  • To remove, the resolution must be passed by OR

  • Has a GM already been called? If so, Ds may agree by majority to consider the special notice if there are still 14 clear days until the GM (s.312(3))

Procedure: Unco-operative Board:

  • Members owning at least 5% of the voting shares can force Ds to hold a GM (s.303)

  • Ds have 21 days to call the GM (s.304(1)(a))

  • The GM must be held within 28 days of being called (s.304(1)(b))

  • Example: Ds receive s.303 notice on June 1st. Last day on which they may call a GM is Jun 22nd. If called on that day, then July 20th is the last day on which GM may be held.

  • Ds still refuse to call GM: members call it themselves under s.305 by giving 14 clear days’ notice under s.305(4). It must be held within 3 months from when the directors first received the s.303 notice to call

Protection from Removal
  1. Bushell v Faith Clause: gives threatened D weighted voting rights if resolution put forward to either remove him or remove the clause that gives him weighted voting

  2. Fixed-term service contract: if it’s of long duration without a break clause

  3. Shareholders’ Agreement: whereby parties can agree not to vote against specific Ds

  4. Outstanding loan: if D lent the company money, it is expressed to be immediately repayable if the D is dismissed (this will disincentivise the company to dismiss him)

Payment for Loss of Office
  • Must obtain member’s OR at GM or by WR (s.217(1)) for a non-contractual payment

  • Memorandum with particulars of payment drawn up (s.217(3))

  • Memorandum available at RO for 15 days (s.217(3)(b)) or annexed to WR (s.217(3)(a))

  • Payments to past Ds (s.215(1)) and connected persons (s.215(3)(a)) are also caught

  • Exemption for small payments with a total value of less than 200 (s.221)

  • Also see Textbook for further info

Dismissal of Employees


If the employer has committed a repudiatory breach of contract (such as humiliating the employee; unreasonable work demands; unilateral alteration of contract terms) will permit the employee to:

  1. Treat the contract as discharged

  2. Leave without notice

  3. Bring a claim for wrongful dismissal against the employer

unless: a) the employee committed a repudiatory breach of a express or implied term of their contract; or

b) the employee did not leave within a reasonable time of the employer’s breach. In which case the employee is deemed to have affirmed the contract

WRONGFUL DISMISSAL (Common Law Claim) P.464

Employee must show that…

Their employer has terminated their contract in breach of employment by either:

  1. Contract with indefinite term: giving “inadequate” notice; or if

  2. Fixed term contract: ending it before the expiry date

Inadequate notice

If the notice period in the contract is shorter than the statutory minimum (s.86 ERA ’96), then the statutory minimum will apply:

Employed for… Statutory ee hich case he is deemed to have reafirmed therefore are filed to Companies House.sona that wants a quick way of obtMinimum notice…
1 month 1 week
2 years 2 weeks
3 years 3 weeks (etc…)
12 years 12 weeks (maximum)
40 years 12 weeks
  1. Aim: to put employee in position as if the contract had not been breached

  2. Start: net salary employee would have earned during notice...

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