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It happens: a relationship between directors has soured, and the question arises of how a director can be removed. Assuming that the director is unwilling to voluntarily resign (and won't be persuaded to), the ability to remove them will, as ever with law, depend on the circumstances.
It may be that you have a well-drafted service agreement in place which clearly sets out the director's obligations and states that certain actions amount to a breach requiring their termination of employment and resignation as a director. It may be that they've breached such terms.
Perhaps you have a bespoke provision in your articles (and/or shareholders' agreement) which permits a board majority to remove a director (and you have a board majority to do so) or, indeed, permits shareholders of a certain share class or certain individuals to take such action.
Or maybe you have none of the above. In that case, you may follow the statutory procedure to remove a director, provided that you have sufficient shareholders (a simple majority) to pass a resolution in favour of such action. There is a set process for this.
With all the above, any removal will need to consider the right to compensation for loss of office and any employment rights of the individual. And, of course, if the director holds shares in the company, there is the additional question of obtaining those shares. In the absence of an agreement (e.g. Articles, Shareholders’ Agreement and/or Service contract) setting out what happens to shares in such a scenario, you will typically have to reach a deal with the director to purchase these shares, which may not be easy.
Prevention is better than cure. Having a proper framework in place in advance of such falling outs is more than sensible. It clearly sets out what happens to directors in certain events and how they can be removed from office. It's much easier to agree on these in advance when everyone is getting on, as opposed to trying to navigate these issues when things go wrong.
And, of course, if that ship has sailed and you're in need of assistance, there are likely still options, and it's always worth chatting through with a solicitor.
To discuss any of the above further, please contact Philip: philipmiles@bexleybeaumont.com | 07388 344576
