Removal Of A Director And Employee - Business Law and Practice

• 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

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

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 1^st. Last day on which they may call a GM is Jun 22^nd. If called on that day, then July 20^th 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

• 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

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