Removing a director can be necessary when trust has broken down, a business needs new leadership, or a director is no longer able to carry out their role. But knowing how to remove a director is not simply a Companies House formality. The correct route depends on your company’s articles of association, any shareholders’ agreement and the reason the director is leaving.
A rushed or poorly managed removal can lead to a shareholder dispute, an employment claim or challenges to the validity of decisions made afterwards. A clear process protects the company while treating the individual fairly.
How to remove a director: start with the company rules
Before taking any formal action, review the company’s articles of association. These are the rules governing how the company is run. They may allow the board to end a director’s appointment in particular circumstances, such as prolonged absence, bankruptcy, incapacity or a serious breach of duty.
You should also check whether there is a shareholders’ agreement or service agreement. A shareholders’ agreement may set out an agreed process for removing a director or dealing with their shares. A service agreement may affect notice, pay, confidentiality, restrictive covenants and other employment-related rights.
The distinction between being a director, shareholder and employee matters. One person may hold all three positions, but removing them as a director does not automatically remove their shares or end their employment. Each issue usually needs to be dealt with separately and carefully.
The main ways a director can leave office
A director may resign voluntarily by giving written notice in accordance with the articles or their appointment terms. This is usually the most straightforward outcome where relations remain workable.
In other cases, the articles may permit the remaining directors to remove a director by board decision. Whether this is available, and what procedure applies, depends entirely on the company’s rules. The board must follow those rules precisely and record its decision properly.
If the articles do not provide a suitable route, shareholders can generally remove a director under section 168 of the Companies Act 2006. This requires an ordinary resolution, meaning more than half of the votes cast must support the removal. However, it is subject to important procedural protections for the director concerned.
A director can also cease to hold office in certain other circumstances, including death, disqualification or where a relevant provision in the articles applies. The appropriate response will depend on the facts and should not be assumed from the company register alone.
Removing a director by shareholder resolution
Where shareholders use the statutory route, special notice of the proposed resolution is required. The company must receive this notice at least 28 clear days before the general meeting where the resolution will be considered.
Once the company receives valid special notice, it must notify the director promptly. The director has the right to make written representations and, where appropriate, to speak at the meeting. These rights are designed to ensure that removal is not conducted without giving the individual a fair opportunity to respond.
The company then needs to call a properly convened general meeting. For most private companies, members must receive at least 14 clear days’ notice unless a shorter period is validly agreed. The notice should clearly state the proposed resolution and explain the meeting arrangements.
At the meeting, shareholders vote on the resolution. If the required majority is achieved, the director’s appointment ends from the date of the resolution, unless the resolution specifies a later date. Accurate minutes should be prepared, showing who attended, the wording of the resolution and the voting outcome.
A written resolution cannot be used to remove a director under section 168. This catches many small companies out, particularly where shareholders are used to approving decisions informally. Even where everyone expects the same result, the statutory process must be followed.
What if the director is also a shareholder?
Removing a director does not take away their shareholding. They may remain entitled to vote, receive dividends where declared and access information available to shareholders. In a company with two equal shareholders, this can create a deadlock: one person may not have enough voting power to remove the other.
The shareholders’ agreement may contain a mechanism for buying shares, resolving deadlock or dealing with a departing director. If it does not, negotiation or formal dispute resolution may be needed. It is often sensible to consider the directorship, employment position and share ownership together before starting the removal process.
Do not overlook employment and contractual rights
A director may also be an employee, consultant or office holder under a service agreement. The company can have authority to remove them as a director while still owing contractual notice, salary, holiday pay or other obligations.
Equally, allegations of misconduct should be handled with care. If the removal relates to conduct, performance or a breakdown in working relationships, there may need to be a separate employment process. The right approach depends on the person’s legal status, their contract and the circumstances.
This does not mean a company cannot act where action is needed. It means that the board should avoid treating one corporate step as a complete answer to every connected issue. Keeping communications measured, maintaining confidentiality and preserving evidence can reduce the risk of an avoidable dispute.
Update Companies House and company records
After a director leaves office, the company must notify Companies House using form TM01. This must normally be filed within 14 days of the change. The filing records the date the appointment ended and updates the public register.
The company should also update its own statutory registers, including the register of directors and, where relevant, the register of directors’ residential addresses. If the change affects a person with significant control, that position should be reviewed and the relevant register and filings updated where required.
Companies House filing is essential, but it does not correct an invalid removal process. It is the public notification of a change that has already lawfully happened. This is why meeting notices, resolutions, minutes and the underlying company documents all matter.
Practical matters should be addressed promptly too. Consider bank mandates, access to accounts and devices, company email, authority to sign contracts, passwords, client information and any company property. Access should be managed lawfully and proportionately, particularly if an employment relationship is continuing.
Common mistakes when removing a director
The most common mistake is relying on an informal agreement without checking whether it is legally effective. Another is failing to distinguish a director’s office from their employment and shareholding. Both can leave the company exposed to a challenge after the event.
Problems also arise where shareholders use the wrong voting procedure, do not give proper notice, fail to let the director make representations, or submit the TM01 before the removal has been validly approved. In a family business or owner-managed company, it may feel uncomfortable to formalise these steps. Yet a respectful, documented process is often the best way to protect relationships and the business.
Where there are concerns about wrongdoing, a significant shareholder dispute, equal voting rights or a director who refuses to cooperate, early legal guidance can help clarify the available options. It may be possible to resolve matters through a negotiated resignation and agreement, but that depends on the facts and the documents already in place.
When to seek legal support
Professional advice is particularly valuable if the director owns shares, has a service agreement, disputes the allegations against them, or their removal could affect a major contract, lender or regulated activity. It is also sensible to seek advice where the company’s articles are unclear or the shareholders are divided.
Alfred James & Co Solicitors LLP can help business owners understand the process, review the relevant company documents and take practical steps with confidence. The aim is to protect the company’s interests while ensuring decisions are handled fairly and with proper care.
A director’s removal is often about more than one boardroom decision. Taking time to establish the right process at the outset can give the business a firmer footing for whatever comes next.
