Ending a directorship

Question 1

what must be considered before the removal of a D?

Answer 1

PLCs must always have 2 Ds and LTDs must always have 1. If end of directorship leaves the company with below the required amount, a new D must be appointed

Question 2

how is a D removed?

Answer 2

• SHs have a statutory power under CA 2006 which cannot be disapplied under the articles; or
• in accordance with the articles

Question 3

explain how SHs can remove a D using their statutory power (inc the procedure)

Answer 3

SHs can remove a D by OR:
o SH would requisition a GM. Special notice procedure to be followed.
o D cannot be removed using WR procedure. Must be at a GM only.
o D is entitled to make written representation of reasonable length + request the facts are inc. in any notice to SHs/send the representations to SHs
o If SHs do not receive them beforehand, D can require they are read out at the GM

Question 4

how can a directorship be ended under the MAs?

Answer 4

The MAs provide a directorship can end upon:
o Automatic termination (i.e. under law, bankruptcy order, declared medically unfit)
o D’s resignation
o Removal by OR of SHs

Question 5

explain Bushell v Faith clauses

Answer 5

Any article claiming to exclude SHs statutory right is void, but a Bushell v Faith clause in the AAs is allowed.

If D is also a SH, their shares carry extra votes on a resolution to remove them or amend/remove the Bushell v Faith clause

Question 6

what might D being removed who is also a SH do?

Answer 6

bring an unfair prejudice claim or derivative claim

Question 7

what administrative requirements take place once D has been removed?

Answer 7

• CH must be informed within 14 days. Failure = criminal offence.
• Registers must be updated
• Removing D from office does not absolve the company from liability under D’s service contract. The company may need to make a payment for loss of office.

Question 8

for what period may D be disqualified?

Answer 8

min. of 2 years and max. 15 years

Question 9

how does a D become disqualified? what is the most common ground?

Answer 9

there are lots of grounds upon which D may be disqualified, the most common is that D’s conduct was unfit whilst the company was/is insolvent

this application is made by the official receiver or SoS

Question 10

what is the effect if D engages with a company whilst disqualified?

Answer 10

Once disqualified, acting as a D or being concerned with promotion, formation or management of a company is a criminal offence + they will be liable for company debts