Directors

Who can be a director?

Every private company must have at least one director.  While corporate directors are allowed, at least one director must be an individual (a natural person).  A newly appointed director must be at least 16 years old.  There is no upper age limit for a director.

The company must keep a register of directors and a register of directors’ residential addresses with certain specified information relating to that director.  In the case of an individual, this includes their name, date of birth, nationality, occupation, address for service and residential address.

A person can be prohibited from acting as a director in several circumstances.  These include:

• if the individual is an undischarged bankrupt
• if the individual is disqualified by a court order under the Company Directors Disqualification Act 1986 from acting as a director

A person who was a director of a company within 12 months before it entered into insolvent liquidation cannot, for the next 5 years, be a director or otherwise involved in the management of a company with the same or similar name as the insolvent company (or under which it carried on business) in the 12 months its liquidation.

Appointment of directors

An individual or company must consent to act as a director.  This is usually satisfied by written notice to the company.

The process for appointing and removing directors is governed by the company Articles of Association, any Shareholders Agreement and general law (primarily the Companies Act 2006).

The Articles of Association or Shareholders Agreement may contain specific provisions for how directors are appointed and removed.  These might require approval by the shareholders, by the other directors or that one or more shareholders has the right to appoint and/or remove one or more directors.  They may also specify a minimum or a maximum number of directors for the company.

In the absence of specific provisions, a director may be appointed by resolution of the board of directors or by an ordinary resolution of shareholders.  The directors will have this authority if the company has adopted the Model Articles without amendment.

The appointment must be notified to Companies House within 14 days. This is done online using Companies House form AP01 (or form AP02 in the case of a corporate director).  

Removal of directors

A director can always resign voluntarily.  The Articles of Association and/or Shareholders Agreement may also include specific procedures for removal of a director. For instance, these might require removal by shareholders or other directors or grant certain shareholders the right to remove specified directors.  

Under the Companies Act 2006, a director can be removed by ordinary resolution of shareholders.  This resolution must be passed at a shareholder meeting, not by written resolution.  “Special notice” of the proposed resolution must be given by the proposing shareholder(s) to the company.  This statutory removal procedure cannot be overridden by the Articles of Association.

On receipt of the special notice, the directors must call a shareholder meeting to be held no earlier than 28 days following the date of receipt of the special notice.  The director who is the subject of the resolution has the right to make written representations concerning the potential removal, which the company must circulate to shareholders before the meeting.

The special notice can also include a resolution to appoint a new director in place of the director being removed.

An ordinary resolution (simple majority) is required to remove a director under this special notice procedure.  

Weighted voting rights

Weighted voting rights can protect a shareholder who holds less than 50% of the voting rights from being removed as a director under the special notice procedure.  These rights allow the shareholder to exercise multiple votes per share on a resolution to remove them or their appointed representative as a director.  This ensures that the resolution cannot be passed if the shareholder votes against it.  Such protections are common in the Articles of Association of joint venture companies, companies with multiple individual shareholders and in situations where an investor wishes to project its rights to appoint a director.

Employment rights of a removed director

The removal of an individual as a director does not affect their employment rights or status with the company.  However, the removal may constitute grounds for an employment claim against the company, including for wrongful dismissal.

Potential unfair prejudice claim

If the removed director is a shareholder (or a representative of a shareholder), the shareholder may have grounds to petition the Court under the Companies Act 2006, on the basis that the affairs of the company are being conducted in an unfairly prejudicial manner.  This is especially the case if the company is found by the Court to be a quasi-partnership and the shareholder had a legitimate expectation to remain involved in the management of the company.  If the Court upholds the claim, the likely remedy would be for the petitioning shareholder’s shares to be purchased by the other shareholders at their fair value.