152. Removal of directors Flashcards
- Removal of directors
General overview
[152.01] Section 152 deals with the removal of directors in public and private companies. By and large, the law allows directors in private companies to be entrenched in office pursuant to the constitution and s 26A, unlike in a public company where directors can always be removed by an ordinary resolution.
Removal by ordinary reso
[152.02] Unlike a private company, a public company may not entrench its directors as s 152(1) provides that a director of a public company may be removed by an ordinary resolution, notwithstanding anything in its constitution. For a discussion of the practice of the UK, Australia and New Zealand on the issue of entrenchment of directors in public and private companies, see the Report of the Steering Committee for Review of the Companies Act, April 2011 at paras 61–68.
Removal in private companies
[152.03] Act No 36 of 2014 provides for the first time that “Subject to … the constitution, a private company may by ordinary resolution remove a director … notwithstanding anything in any agreement between the private company and the director”: s 152(9). This means that any entrenchment of a director’s office has to be provided in the constitution rather than by an agreement between the company and the director, indicating the need for the consent of the members of the company to such an arrangement. A director was removed by a written resolution signed by a majority of directors appointing one of them as corporate representative without notice to the rest of the directors. It was held that no director or group of directors could exclude one or more directors from their deliberations or exclude their input before a decision was taken. This went to the root of essential justice: Polybuilding (S) Pte Ltd v Lim Heng Lee & Ors [2001] 2 SLR(R) 12; [2001] SGHC 95, HC ; followed Chan Choon Ming v Low Poh Choon (1994) CSLR VI [254] ; and distinguished Lee Tak Samuel v Chou Wen Hsien [1984] 1 WLR 1202; [1984] HKC 409 . In most private companies, the constitution often provides that the board may dismiss one of its own directors by notice of request to vacate office: Thio Keng Poon v Thio Syn Pyn & Ors and Another Appeal [2010] 3 SLR 143; [2010] SGCA 16. Where the articles of a company provide that a director shall vacate his office on the happening of some event or the doing of some act, a director automatically vacates his office on the happening of the event or the act being done; and the board has no power to waive the event, or to condone the offence or the act, which caused the vacation of the office: Re the Bodega Co Ltd [1904] 1 Ch 276, Ch D . An ex parte injunction will not be granted to a director to restrain the proceedings of an extraordinary general meeting that was convened to remove him: Kitnasamy s/o Marudapan v Nagatheran s/o Manogar & Anor [2000] SGHC 21, HC.
[152.04] In Malaysia, by virtue of s 128(1) of the Companies Act 1965 (Malaysia), a simple majority of the shareholders of a company may vote to remove a director and no agreement made by the directors or the company can fetter that right. The courts will not interfere with the statutory right of shareholders to remove directors: Tuan Haji Ishak bin Ismail & Ors v Leong Hup Holdings Bhd and Other Appeals [1996] 1 MLJ 661, CA ; followed Bentley-Stevens v Jones & Ors [1974] 2 All ER 653 ; Solaiappan v Lim Yoke Fan & Ors [1968] 2 MLJ 2 ; and Dato’ H M Shah & Ors v Dato’ Abdullah bin Ahmad [1991] 1 MLJ 91. The court would not grant an injunction to restrain the dismissal of a director if that was made through a resolution that was endorsed by the majority shareholders and the dismissal complied with the articles of the company
Casual vacancy
[152.05] Where a director is appointed to fill in a casual vacancy pursuant to reg 72 of the Companies (Model Constitutions) Regulations 2015, his appointment terminates on the next following annual general meeting (“AGM”). By virtue of reg 95 of the Companies (Model Constitutions) Regulations 2015 the managing director could only be appointed from among the directors of the company and that he would immediately cease to be managing director if he ceased to hold the office of a director. Hence, the service contract entered into with the managing director when he ceased to be a director was invalid and unenforceable
Entrenchment of directors in private companies
[152.06] Special voting rights may protect directors against removal under the Companies Act 2006 (UK): Bushell v Faith [1970] AC 1099, HL . Further, see ss 26A and 39 of the Act and the cases therein
Special notice
[152.07] Twenty eight days’ notice under s 185 is required to be served on the director to be removed by the company: s 152(2).
