Directors

Under English law, any individual aged 16 or over can be a company director, provided they’re not disqualified (for example, due to a disqualification order or bankruptcy). Directors don’t need to live in the UK or hold shares in the company. While companies can appoint corporate directors, every private limited company must have at least one individual director.

In many companies, certain shareholders are given the right to appoint one or more directors, as long as they continue to hold a minimum percentage of shares. These rights can be written into the Articles of Association or a Shareholders’ Agreement, and in some cases attached to specific classes of shares. This allows key shareholders to ensure they’re represented on the board while they remain invested.

Directors can be appointed in two basic ways:

• By the board of directors, if permitted by the Articles of Association
• By shareholders, usually by passing an ordinary resolution

Many companies go further and include provisions in their Articles or Shareholders’ Agreement allowing specific shareholders – typically holding a set percentage of shares – to appoint (and remove) directors directly. These rights may be linked to particular share classes, such as Founder Shares or Investor Shares, and are often included to give ongoing influence to those who have a significant stake in the business.

The appointment process must be properly documented, with the necessary filings made at Companies House.

Directors can be removed by shareholders through a statutory process set out in section 168 of the Companies Act 2006. This involves passing an ordinary resolution at a general meeting, even if the Articles or service contract state otherwise.

However, there are strict steps to follow — and one of the most important is giving special notice of the intention to remove the director.

What is special notice?
Special notice means at least 28 clear days’ notice must be given to the company before the meeting at which the resolution will be considered. The company must then inform the director, circulate the resolution to all shareholders, and allow the director to make written representations or speak at the meeting. If this procedure isn’t followed correctly, the removal may be invalid.
To help get this right, PaperRock offers a Special Notice of Resolution to Remove a Director template. This includes a legally compliant notice and step-by-step guidance to avoid common mistakes.

In addition to the statutory process, many Shareholders’ Agreements and Articles of Association include contractual rights to remove directors — especially where a director has been appointed by a specific shareholder or group. These rights typically apply only while the shareholder holds a defined minimum percentage of shares, and can provide a more straightforward route for removal without needing a shareholder vote.

Where removal is being considered, it’s important to check:

• Whether any contractual removal rights apply
• Whether the director is also an employee or shareholder
• Whether Articles or share rights impose conditions on removal

Weighted voting rights in the Articles of Association can give certain shareholders enhanced voting power. For example, a shareholder might hold 10% of the company’s shares but 50% of the voting rights for particular resolutions. These arrangements are often used to protect founder control or investor influence, especially in early-stage businesses.

If director removal requires a shareholder vote, weighted voting rights can allow a minority shareholder to block a resolution – even where most other shareholders support it.

Separately, the company’s Articles of Association may include rights for specific shareholders to appoint and remove directors directly, regardless of how the rest of the shareholders vote. These rights are usually linked to shareholding thresholds and may be set out as rights attached to a particular class of shares.

Removing a director under company law doesn’t automatically terminate their employment. Many executive directors also have a contract of employment, which must be ended separately and in line with employment law and any contractual terms.

If you dismiss someone as an employee without following the correct process, you could face claims for unfair dismissal – even if they’ve been validly removed from the board. Where a director was appointed under a Shareholders’ Agreement, and then removed via those rights, this should only affect their director role, not their employment status.

Potentially, yes – but only if the director is also a shareholder. Under section 994 of the Companies Act 2006, a shareholder can bring a claim if they believe the company’s affairs have been conducted in a way that is unfairly prejudicial to their interests.

Common grounds for a claim include:

• Being excluded from management without justification
• Breach of terms in a shareholders’ agreement
• Misuse of company assets
• Removal as a director without following agreed procedures

Where a director had a contractual right to be appointed (for example, linked to their shareholding), and that right is disregarded or undermined, the risk of an unfair prejudice claim increases.

PaperRock offers a full suite of related templates, including:

• Director Appointment and Removal Resolutions
• Special Notice to Remove a Director
• Shareholders’ Agreements
• Bespoke Articles of Association
• Director Service Agreements

Each document includes detailed, user-friendly guidance notes – written in plain English – to help you get it right the first time in a cost-efficient manner.  Explore our document index or use our search bar to find the right document for your needs.