Removal of directors Flashcards
What is required to remove a director?
An ordinary resolution, with notice of the proposed resolution given to the board at least 28 days before the GM.
Can directors who are also shareholders vote on their removal?
Yes
What are the two ways a removal resolution can be put forward?
- Board places removal resolution on agenda and gives shareholders at least 14 clear days’ notice (possible in a newspaper ad if the notice has already gone out)
- Board does not place removal resolution agenda for GM, SHs use their powers to serve a request on the company
If the board voluntarily puts the removal resolution on the agenda, when is the earliest that the GM could be held?
28 clear days from the special notice (director must be warned. The 14 days clear notice for the GM must also be given within this time)
What can shareholders do if the board does not place the removal resolution on the agenda?
Shareholders can call a general meeting:
- serve a s303 notice by SHs holding not less than 5% of the paid up voting share capital
- this requires the board to call a GM
What is a s 303 request?
A request by shareholders to the board to call a GM. It must state the general nature of the business the SHs want addressing and may include the text for the proposed resolution
What is the timeframe for the board to call a GM after receiving a s 303 request?
The board must call a GM within 21 days (not clear) from receipt of the request, and the GM must be held not more than 28 days (not clear) after this date of notice.
What happens if the board fails to call a GM after a s 303 request?
Shareholders who submitted the request or representing more than 50% of voting rights can call a meeting - s305
What is the minimum notice period for a GM called pursuant to a s 305?
There must be 14 clear days’ notice before the GM, and the GM must be held within 3 months of the date that the directors received the s303 request
How can the board win the most time before it has to call a GM?
By co-operating with the s303 request - this gives the board 50 days from receiving the s303 request rather than 38 days (21 days + 14 clear days notice for GM)
What right does a director have regarding removal?
A director has the right to make representations in writing, which should be read out or circulated to members of the company. They also have the right to be heard at the GM.
What should be checked if a director is also a shareholder?
The weighted voting rights in the articles and the shareholders’ agreement should be checked.
Where is the Bushell v Faith clause found?
In the articles
Why should the articles be checked if a director is removed?
The articles should be checked to determine whether there are any transfer provisions to force a director to transfer their shareholding in case of removal.
What may shareholders’ agreements provide regarding director removal?
Shareholders’ agreements may provide that unanimous consent of all shareholders is required for a director to be removed.
What does a director do if removed despite a shareholders’ agreement requiring unanimous consent?
The director will still be removed by OR but the director can sue against the other shareholders in contract
What is required for compensation for loss of office?
Any payment must be approved by the company.
What must be made available to shareholders before passing an ordinary resolution to approve compensation for loss of office?
A memorandum setting out particulars of payment must be made available to shareholders for 15 days before the ordinary resolution is passed.
What does legislation require regarding payments for loss of office?
Legislation requires shareholder approval for:
- any payment for loss of office made in connection with the transfer of the whole or part of the undertaking or property of a company.
- any payment for loss of office made in connection with a transfer of shares in the company or one of its subsidiaries.
