In business, various situations can arise wherein removing directors from your company is necessary. This could be due to problems that occur when working with certain individuals, or reasons as simple as you yourself would like to move on from your current company. Whatever your reason, it pays to know the details of how you can remove a director from your company.
Removing a director from your company
When removing a director from your company, there are two categories to consider – stepping down as a director yourself, or removing another director from company records. The process is fairly similar for both situations, though each category has key details that differentiate the two.
Stepping down from your director role
There are many reasons why you would want to step down from your position as a director voluntarily. You might want to resign from your current position to make time for another endeavour, because you intend to move elsewhere, or simply because it’s time to retire. Alternatively, you might have a significant difference of opinion from your fellow directors, making it a challenge to overcome disagreements. If you intend to resign from your position as a director, either due to your own reasons or at the request of your fellow directors, you will have to follow a few steps.
Firstly, you must submit a TM01 form to the Companies House. This form details your intention to terminate your appointment as a director, and typically is a speedy affair. You can choose to submit this form either online or on paper, though the latter will take longer to process. The TM01 form will ensure that your name is removed from the Companies House records, tying up the administrative side of the process.
Once your TM01 form has been completed and submitted, the next step is to inform your fellow directors that you have taken the decision to resign. It is best to have this notice in writing, as opposed to a verbal notice. Lastly, you should issue a formal resignation from your position to your company. Failing to do so will keep you attached to the company, as the TM01 form is essentially telling the Companies House to take your name off records, rather than remove you from the company.
Removing another director from your company
The process is a little different if you instead intend to remove another director from your company. The reason behind the removal can further complicate it, and whether it is voluntary. The simplest scenario is when a director gives his or her own notice. The director would submit a notice of resignation, just as you would if you were stepping down, and the board will hold a meeting. Assuming the director has filed a completed TM01 form, this resignation can run its course, and the director will be removed from the company and relevant documents.
Though the above scenario is straightforward and typically the most desirable, it is not always the case that directors leave voluntarily. Sometimes, due to an egregious error, insurmountable disagreement, or a variety of other reasons, directors must be removed from their position by others. This can be done by the board of directors, either by citing the articles of association or through an ordinary resolution, or by another authority.
Articles of association
If you intend to remove a director, you have two methods of doing so. First, the board of directors could serve a written notice of removal to the director in question, citing the articles of association. These articles allow the board of directors to dismiss a director under certain circumstances. For example, suppose a director is subject to a bankruptcy order, or has been prohibited from acting as a director due to particular circumstances. In these cases, the board can cite this as a reason for dismissal. There is no need for deliberation or a lengthy decision-making process; the law requires that the director be removed immediately.
The second option is to use an ordinary resolution. This is applicable when the director in question hasn’t done anything that requires removal by law, but the board would still like to issue a notice to remove. In this case, the board must arrive at a simple majority, more than 50%, of directors in agreement with the dismissal. A single director can initiate this process, and will be responsible for issuing a “special notice.” This notice declares the intent to remove a particular director, and must be submitted at least 28 days before the meeting to discuss the removal takes place.
The director that faces removal will have a chance to make his or her case at this meeting, and must also be given a copy of the special notice. A record of the meeting must be kept, and if the director is removed as a result, the company’s register must be updated. After the decision has been made, a TM01 form must be filed at the Companies House within 14 days. This will remove the director from any records the Companies House keeps, marking the end of the process.
While directors can be removed from their position by the board of directors, they can also be removed by certain authorities. These authorities include the Companies House, the Insolvency Service, the Courts, a company insolvency partner, and the Competition and Markets Authority. This action is reserved for when a director is guilty of misconduct, enough to warrant their disqualification from the position. Actions that fall into this category could be failing to uphold obligations to creditors, failing to submit the appropriate records or accounts, and several others.
The relevant authority will send the director in question a written notice, detailing the suspected misconduct. At this point, the director will have three options: defend against these accusations, voluntarily step down and avoid court proceedings, or allow the issue to be brought before a court. If the director is disqualified, either voluntarily or as a result of a court hearing, they will be recorded in the Disqualified Directors Register, which is kept at the Companies House. The director must then be removed from his or her position.
What to do if your company is facing financial difficulty
If you are considering stepping down from your position as a director due to a difficult financial situation, you should first consider your alternatives. Contacting a licensed insolvency practitioner is the best way to get an overview of what options might be available, and they can help you implement the right solutions to your situation. For example, insolvent companies facing impending legal challenges from creditors would be well suited to a Creditors’ Voluntary Liquidation (CVL). This method allows you to liquidate your company while enjoying protection from legal challenges. Your personal finances will be kept safe, and you can also uphold your obligations to creditors. Alternatively, opting for a business rescue could be just what you need to get back on track.
Let Clarke Bell help
If you are considering resigning from your position as director, or need some help restoring your company to a solid financial state, then let Clarke Bell help. We have over 28 years of experience in helping struggling companies find the best path forward, and ensuring directors have the best solutions at hand. If you need assistance, don’t hesitate to reach out for a free, no-obligation consultation, and find out what we can do for you.