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Removal Of A Director Notes

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Removal of a Director Removal by the Shareholders The shareholders can remove a director by passing a removal resolution under s.168(1). Shareholders must give special notice to the company at least 28 days before the vote (s.312(1) & s.360(1)) which must be sent to the director being removed (s.169(1)). The directors are entitled to refuse to place the removal resolution on the agenda for the general meeting (Penley v Inland Waterways), if this occurs then the shareholders have the power to require the directors to call a general meeting under s.303(1). This must be done by shareholders owning at least 5% of the paid up voting share. The s.303 request will state the resolution proposed and the nature of the business. The directors then have 21 days in which to call the meeting for a date not more than 28 days after calling the meeting (s.304(1)). If the directors continue to fail to do this then the shareholders have the power to call the meeting themselves (s.305). At the general meeting the director being removed has a right make written representations (s.169(3)) and speak in their own defence at the general meeting (s.169(2)).

Settlement Agreements Often settlement agreements will be agreed as part of removing the director. The agreement must comply with s.203 which requires the agreement to be in writing and specifically state what claim is being settled by the agreement. The agreement must also identify an independent advisor who has PII (Professional Indemnity Insurance). An ordinary resolution will be required under s.211 for any ex gratia payments to the director. The first PS30,000 of genuine compensation will be tax free.

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