As a business evolves, the people in charge of running the company might also change. If you’re planning to remove a company director, then you’ll need to follow a series of steps to ensure you meet legal and regulatory requirements. 

There are many reasons why you might be planning to remove a company director; perhaps someone is retiring or is simply stepping away from the business to embark on a new adventure. 

Or maybe you’re parting on less amicable terms, perhaps due to a legal issue or another situation that could impact your company's reputation. 

Regardless of the why, you’ll need to follow the same process. 

In this guide, we’ll cover everything from the role of a company director through to the administrative and legal process of removing one from your business. Let’s get started. 

What is the role of a company director?

A company director is responsible for the running of a business. In a limited company, those responsibilities can be split between one or more directors who have to manage the legal, administrative, and day-to-day running of the company. A director is also responsible for sending information to Companies House correctly and on time. 

Learn more about the responsibilities of a company director in our guide.

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Legal considerations for removing a company director 

Before we go into the step-by-step process for removing a director, we need to cover some of the most important legal considerations you need to know. Consult a legal professional before taking action and make sure you’ve got a basic understanding of the following points…

The Companies Act 2006 outlines the requirements for the removal of a company director in sections 168 and 169. Section 168 lays out the shareholders’ right to remove a director; in simple terms, it states:

• Removing a director: Shareholders can remove a director from their position before their term ends, even if the director's contract or the company’s rules say otherwise.
• Ordinary Resolution: To remove a director, shareholders must pass an ordinary resolution (a majority vote at a general meeting) - more on this later.
• Special Notice: The company must receive special notice of the intention to remove the director. This means shareholders proposing the removal must give at least 28 days' notice to the company before the meeting.
• Director’s Right to Defend: The director has the right to make their case via written representations, which must be shared with all shareholders before the meeting.
• Exemptions: Charity companies are exempt from this section if the director’s removal conflicts with the rules of that charity.

Section 169 is an extension of this, focusing on the director’s right to protest their removal, it states:

• Written defense and right to speak: The director has the right to submit written representations explaining why they should not be removed. These representations must be sent to the company in writing at a reasonable time before the shareholders' meeting, where the removal will be discussed, and then the director can speak in the meeting in defense of their removal.
• Circulation of Representations: The company must send the director’s written representations to all shareholders before the meeting.
• Exceptions: If the court finds that the director's representations are defamatory, frivolous, or irrelevant, the company doesn’t have to circulate or read them

So, Section 169 ensures that a director facing removal has a fair opportunity to present their side of the story, protecting their rights while maintaining shareholder power.

Step-by-step process for removing a company director

1. Determine legal grounds for removal

There are a few reasons why you might need to remove a company director - here’s a list and a short explanation of each:

• Retirement/voluntary removal: A company director might be consensually leaving the business because they are retiring or simply moving into another role elsewhere. (Don't worry, we cover the voluntary removal of a company director further down. )
• Misconduct or breach of fiduciary duties: This covers a broad area of activities, such as misappropriation of assets, not delivering goods/services agreed, or even embezzlement or forgery. If there is a legal issue, then you may need to remove the director through court proceedings - we explain more about this proces
• Incapacity or inability to fulfil responsibilities: You must be aware of legalities such as the Mental Health (Discrimination) Act 2013 and what role this might play in the director’s defense. 
• Conflict of interest affecting company operations: For example, a company director may not disclose other business interests.

2. Read the company’s Articles of Association

Within the company’s Articles of Association, there might be specific information or procedures pertaining to the removal of a company director. For example, there may be a detailed procedure for removal, which you’ll need to follow to ensure compliance.

The Articles might also disclose protection clauses, which protect company directors from removal without justified cause, often the case for founders or long-standing shareholders.

We’ve covered Articles of Association in more detail in this guide. 

3. Ordinary Resolution

Where the removal of the company director is not voluntary, the shareholders will need to vote on the proposal at a general meeting known as the Ordinary Resolution. 

As we’ve already mentioned above, The Companies Act 2006 states that a director can be removed from a company by the Ordinary Resolution of shareholders, this process involves:

A general meeting

Shareholders with at least 5% paid-up share capital can call a board meeting to discuss the proposal for the removal of a director. 

The company must provide at least 28 days’ notice to all shareholders and the director about the general meeting; this will also need to make clear the intention of removing the director in question. 

Written defense and right to speak

The director in question has the right to submit a written defense to the shareholders, as well as the opportunity to speak at the meeting, as stated in Section 169 of the Companies Act. 

Voting 

The Ordinary Resolution to remove the director must be passed by a shareholder majority vote at the general meeting. 

4. Inform Companies House

Once formally agreed, the remaining director(s) will need to submit a TM01 Form to Companies House within 14 days of the director’s removal. Download this form from the GOV.UK website.

Removal through court intervention

The process of removing a company director through court intervention is called director disqualification. The most common scenarios for court proceedings include:

• The director has broken the law and/or breached fiduciary duties
• There is a shareholder deadlock
• A director is going through the process of bankruptcy or another debt relief process
• Other conflicts, such as a shareholder accusing a director of not acting in the company’s best interests, and the Ordinary Resolution process did not work.

The Company’s Articles should detail how to approach legal proceedings in these instances. It’s important to note here that the company may still be legally liable for the company director’s acts before they are removed from the role. Seek legal advice to ensure you’re doing everything you can to protect your company. 

Voluntary Resignation

We’ve discussed the process of involuntarily removing a director from a company, but what about if they are choosing to step down? This is a little more simple, and the process is as follows:

1. Director provides formal written notice to shareholders of their intention to step down.
2. Shareholders formally accept the resignation.
3. Companies House is updated via TM01 Form.

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Special Considerations

We’ve covered the most common ways of removing a company director, including typical scenarios like voluntary resignation and legal conflicts, but there are still a few situations that are worth mentioning… 

When a director is also a shareholder

What about when the director you are removing from the company is also a shareholder? Since these are two different roles, the removal of them as a director will not affect their shares unless otherwise explained in the Company’s Articles or instructed by the court. 

This might be tricky, as the shareholder has rights, and there may also be a shareholder agreement that impacts the process, so make sure you seek legal guidance before making any decisions affecting company directors and shareholders.

A director might want to transfer their shares upon stepping down from their role. They can do this by following the company’s share transfer agreement and filling out a Stock Transfer Form. 

When the director is also an employee

A person’s roles as a company director and also an employee of the company are different – removing a company director doesn’t automatically terminate their employment. To avoid any legal issues, such as unfair dismissal claims, then you should seek legal advice. 

Keep your accounts on track during transitional periods with Crunch

Hopefully, you’re now more familiar with the process of removing a director from a limited company. It’s not always a straightforward process, especially if there is an internal conflict, so you can ensure you protect yourself and your company by following the legal process, ensuring you file all paperwork correctly and on time, and seeking professional legal advice. 

At Crunch, we understand the value of having expert accounting support at every stage of your business journey, especially during transitional periods like the stepping down of a company director. Alongside our cloud accounting software, we provide on-demand support from qualified accountants with experience in your field. 

Want to speak to an accountant about what removing a company director might mean for the business finances? Book a call today.

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