The Removal of Directors Flashcards
Can the Board remove a director?
No, unless Articles allow for it
Can a director, who is a shareholder, vote in their capacity as shareholder on the resolution to remove them?
Yes
How much notice is needed for the removal of a director?
28 clear days
Can a written resolution remove a director?
No
What is a special notice in removal of person resolution?
28 clear days notice before the General Meeting in which they will vote
Who gives special notice for removal of director?
The shareholders give it to the Board
Who usually decides the matters that will be considered at a General Meeting?
The Board of Directors
When the Board receives the notice of proposed removal resolution, what courses of action do they have?
1) Place removal resolution on agenda of GM
2) DO NOT place the removal resolution on agenda of GM
If Board agrees to put removal resolution on GM, what notice is required for the GM?
As standard, 14 clear days’ notice
Why does the board need to give shareholders notice of the removal resolution when it was the shareholders who sent the removal resolution to the board?
Some shareholders may not be aware of it
What happens if the Board does not put the matter on the agenda for the GM?
It will not be considered in the general meeting. The shareholders may need to force directors to call general meetings in accordance with s303 CA 2006
What is a s303 request by a shareholder? Who has the right to make this request?
Shareholders with not less than 5% paid up voting share capital can serve a request on the board to call a meeting on any matter, including the removal of a director
What are directors’ obligations on receipt of a s303 request?
1) Within 21 days of request, call the GM
2) To be held no longer than 28 days after date of notice
What happens if directors ignore the s303 request?
The shareholders can call a GM themselves, pursuant to s305
How long do shareholders have to call a GM themselves under s305?
14 clear days’ notice, within 3 months of directors’ receipt date of s303 request
What is standard procedure when submitting a s303 request?
Will be done at same time as the special notice to the board, not to waste time
What must the company send to the director in question?
A copy of the notice
What has the director got a right to?
A right to make written representations which are circulated and/or read out in GM
If a director is a shareholder, can they vote on their removal? What is the effect on voting?
Yes, they can and may have weighted voting rights, as in Bushell v Faith
What must you do when examining a case regarding the removal of a director who is also a shareholder?
Check the Articles to see if there is a Bushell clause, which would give that shareholder weighted voting rights to prevent removal
Does a shareholder agreement remove the statutory right of majority shareholders to remove a director if it is outlined in the Agreement?
No, it would not. It would simply become a Contractual matter if this were breached.
Could a director be removed if they are a shareholder and the shareholders agreement said their removal needed unanimity?
Yes, they would still be removed.
What could director who is a shareholder do if their removal was a breach of the Shareholders Agreement?
Can make a claim against other Shareholders, and also apply for an injunction to prevent the breach.
Could a director be entitled to compensation for loss of office? How would this be approved?
The Company can decide – but such payment must be approved by ordinary resolution
When would compensation for loss of office not need an ordinary resolution?
1) Payment does not exceed £200
2) Payment made in good faith: i) in discharge of existing legal obligation; ii) way of damages in respect of obligation; iii) in settlement or compromise to termination; iv) by way of pension in respect of past services
Can the compensation be paid to third party to avoid these restrictions?
No
Do non-cash benefits count as payment for loss of office?
Yes
How else could a director be entitled to compensation for loss of office?
Through damages or compensation for breach as per shareholders agreement
