Director Disqualification – Removal from Office and Disqualification
N.B. See Chapter 6 BLP
A director’s term of office can be vacated in several ways.
1) Director can relinquish office at any time by giving notice to the company, but the company must accept
the resignation.
A director’s notice period will usually be expressed in the employment contract, but where it isn’t, a reasonable
term will be implied.
CMS Dolphin Ltd v Simonet 2002
Where a director’s contract does not provide a notice period, a reasonable term will be implied.
2) The articles may provide that a director’s office will terminate upon the occurrence of a specific event
e.g. the model articles provide that a person will immediately cease to be a director if he is prohibited
by law from being a director (e.g. if disqualified). It is also common for articles to provide that a director
must vacate office if requested by the other directors.
3) The articles may provide for retirement of the director by rotation. This is ordinarily the case for public
companies.
Removal
Section 168(1) CA 2006
A company may by ordinary resolution at a meeting remove a director before the expiration of his period
of office, notwithstanding anything in any agreement between it and him
N.B. this can be used to remove one director, or multiple directors.
Section 168(2) CA 2006
Special notice must be given of the resolution, that is to say at least 29 days’ notice before the meeting
at which the resolution is to be moved.
Although Section 168 cannot be ousted by Articles in the company’s constitution, it is possible for a director of
a private company to entrench himself by including in the articles a clause entitling him to weighted voting in
the event of a resolution to remove him.
Weighted voting
S168 does not prohibit companies from including weighted voting clauses in their articles (although they are
not included in the model articles). Such a clause provides that, in the event of a vote seeking the removal of a
director, the voting power of the director will be increased, usually to the extent that he can defeat any resolution
seeking his removal.
N.B. See Chapter 6 BLP
A director’s term of office can be vacated in several ways.
1) Director can relinquish office at any time by giving notice to the company, but the company must accept
the resignation.
A director’s notice period will usually be expressed in the employment contract, but where it isn’t, a reasonable
term will be implied.
CMS Dolphin Ltd v Simonet 2002
Where a director’s contract does not provide a notice period, a reasonable term will be implied.
2) The articles may provide that a director’s office will terminate upon the occurrence of a specific event
e.g. the model articles provide that a person will immediately cease to be a director if he is prohibited
by law from being a director (e.g. if disqualified). It is also common for articles to provide that a director
must vacate office if requested by the other directors.
3) The articles may provide for retirement of the director by rotation. This is ordinarily the case for public
companies.
Removal
Section 168(1) CA 2006
A company may by ordinary resolution at a meeting remove a director before the expiration of his period
of office, notwithstanding anything in any agreement between it and him
N.B. this can be used to remove one director, or multiple directors.
Section 168(2) CA 2006
Special notice must be given of the resolution, that is to say at least 29 days’ notice before the meeting
at which the resolution is to be moved.
Although Section 168 cannot be ousted by Articles in the company’s constitution, it is possible for a director of
a private company to entrench himself by including in the articles a clause entitling him to weighted voting in
the event of a resolution to remove him.
Weighted voting
S168 does not prohibit companies from including weighted voting clauses in their articles (although they are
not included in the model articles). Such a clause provides that, in the event of a vote seeking the removal of a
director, the voting power of the director will be increased, usually to the extent that he can defeat any resolution
seeking his removal.
