Process for sacking a director?

[SickAsAchip]

Hi everyone, this is my first post and I am looking for a little advice;

After a lot of research and reading on this forum, I have found that shareholders, as a minimum, require a 50% total holding in order to pass a resolution for the removal of a director.
(source: limeone.com/forumimages/shareholders%20article.pdf)

I've also learned that Shareholders Agreements and Memorandums of Understanding are very important when it comes to sacking a director.


My questions is this;

What exactly is (are) the process(es) you need to go through in order to sack or remove a director without ending up in a mess legally?

Namely to avoid unfair/constructive dismissal cases being brought.


I understand that Secton 168 of the Companies Act 2006
is to be followed "to the letter" in order to avoid ending up in a mess, legally when sacking or removing a director. Though I cannot fully make sense of this particular section.
(source: opsi.gov.uk/acts/acts2006/ukpga_20060046_en_13)

Can anyone advise me of the process(es) to go through and take in order to remove a director?

The company in question has 3 directors, each with a 33.3% equal split and share of the shares.

Thank you

 

[LimeHR]

Much will depend on what is in your documents with that director but if we assume nothing other than a standard set of memo of articles is in place and the director has worked for the company for over 12 months the process is as follows:

1. Commence discipinary action as you would with any other employee and follow disciplinary process ( check out the ACAS site for free information on this process)

2. Allow the director time to improve, this is very important in the case of a senior member of staff and be very clear about what improvements are expected and how these will be monitored and assessed.

3. Take legal advice before proceeding to dismissal. For the sake of having a HR/employment law professional on board for a couple of hundred pounds you can save thousands in terms of hassle and on going legal fees which come with a tribunal claim. Talk to us about this as we can assist in a variety of ways all at fixed cost.

 

[SickAsAchip]

How long must we allow for 'improvement'?

Also we do not have a disciplinary policy in place as yet, as any advice in relation to this point would be appreciated.

 

[The Resolver]

I have found that shareholders, as a minimum, require a 50% total holding in order to pass a resolution for the removal of a director.
(source: limeone.com/forumimages/shareholders%20article.pdf)

50% is not enough - need 51% minium so as to pass a resolution on a simple majority.

You have to follow two procedures:-

(1) Company law procedure to remove him as a director and then to give notice to Companies House so the register is updated. This requires 28 day notice of a resolution to dismiss the director being given by the shareholder seeking it to the company with copy to the director concerned. The company must then give all shareholders 14 days notice of the meeting. The director must be given an opportunity to submit representations in writing and in any event to attend.

(2) to terminate his employment, if he has been employed. Not all directors are employed- you can have non-executive directors. All companies, even one man bands have to have dismissal procedures in place to be applied whenver any employee is to be dismissed.These are faily basic and mainly involve giving an opportunity for the employee to give his side of the case, with representation if required, before a final decision is reached.

I suggest you deal with (2) first giving him an opportunity to be heard so you can show that any dismissal was fair.

As you have pointed out all this is subject to the Shareholders Agreement.

As to your question about time to improve, it may be zero (if an instant dismissal for extreme conduct) or anything else according to what is fair under the circumstances and past histporyu (has he had a previous warning?) . Bear in mind that if he is employed by the company you can dismiss him from the Board yet retain his status as an employee.