Temporary Directors

[Fotoman]

Hi to all, hope someone can advise...

I am one of 9 directors of a golf club. We serve for three years each then have to apply for re-election. It is normal for three places to be available each year.

Because of a resignation two years ago, the Board used its discretion at that time to co-opt onto the Board the candidate who came 4th. It was said at the time that this person would only serve the remaining term of that director who resigned (ie one year).

Last year, only 2 directors were due for re-election; the 3rd vacancy we presumed would be created through that person who was co-opted on the year before coming off the Board. However, we were informed by our Chairman that according to Company Law (?), the Board could choose to vote off one of those directors who had served the next longest. ie two years. This we did.

I am now informed that this was probably against Company Law.(?)

This year, we again have only two directors due for re-election and this time we were advised, by the Chairman, according to Company Law, those longest serving directors other than the 2 directors who are due for re-election would have to decide amongst themselves who would resign, even to point of drawing lots.

A stalemate situation arose, as none of the four of us wanted to resign and we certainly did not want to draw straws. I am now being informed that the decision would have to go back to the Board for a vote. Also that those 4 directors involved (me included) probably shouldn't vote.

I find this rather strange. I do not want to admit that the Chairman (and Vice-Chairman) is in league with the person co-opted onto Board 2 years ago, but it seems to me that they are trying every measure possible to keep this 4th person on the Board.

I would be most grateful for your views on this?

 

[Alpha]

Sounds to me like there is some collusion afoot.

First question - is the golf club a limited company???

If not company law has nothing to do with it and it is probably a written constitution of all the members when the golf club was formed that is being followed and possibly broken. Ask for a copy of the constitution.

If it is a limited company then the rules will be found in the Articles of Association which you should be able to ask to see.If these rules are not being followed then there is indeed a breach of company law.

 

[Fotoman]

It is a Limited Company.

There is nothing in the Articles of Association referring to this matter. Indeed, there was talk of having to amend these to accommodate this sort of situation.

What I'm asking is, if Company Law states – as I think it does, that a person co-opted on to fill a temporary vacancy must stand down at the end of the term to which the vacancy relates, can a Board of Directors choose to alter this situation without altering its Articles of Association? i.e. would this be in breach of Company Law?

 

[Alpha]

What I'm asking is, if Company Law states – as I think it does, that a person co-opted on to fill a temporary vacancy must stand down at the end of the term to which the vacancy relates, can a Board of Directors choose to alter this situation without altering its Articles of Association? i.e. would this be in breach of Company Law?

I am not aware of anything in company law that states what you have quoted.

The situation you have described sounds like you are following article 73 of table i.e. At every subsequent general meeting one third of the directors who are subject to retirement by rotation shall retire from office.

This retirement is often a mere formality as they eligble for re-election (under article 80 of table A) and a director presenting himself for re-election will be deemed to be re-elected unless at the meeting it is resolved not to fill the vacancy or such a resolution for re appointment is put to the meeting and lost.

Article 79 provides that @The directors may appoint a person who is willing to act as a director, either to fill avacancy or as an additional direcctor, provided that any maximum set by the articles is not exceeded

The (re)appointment of all directors is normally ratified by the members(shareholders) at the AGM.

 

[Fotoman]

Sorry to raise this again, but I've just laid my hands on a copy of Tolley's Company Law book.

19.5 refers to filling a casual vacancy and goes on, rightly, to say that a Director so appointed holds office until the following AGM. ie for one year.

I am looking for agreement from anyone suitably in the know that Company Law was broken (bent?) when we were told that the person appointed to fill the temporary vacancy did not have to step down after that first year.

In our situation, the Chairman chose to follow 19.6 which deals with the retirement by rotation. I am suggesting that they have used this clause to over-ride the one about the director filling the casual vacancy having to step down after a year.

19.6 is open to interpretation. This states that one third (in our case, 3) directors MUST retire each year. But if there aren't 3 eligible directors, then the nearest to one third must retire (in our case 2). It does not state that the the 3rd person must be selected from those next longest serving directors as having served for just two years.

Presumably if a person is duly elected to the Board at an AGM by the members, he is ENTITLED to serve his 3 years?

This Clause also states that unless otherwise agreed amongst those directors due to retire, lots will be drawn if this concerns two or more directors.
:?: Does this mean two or more directors all having served the same length of time?

Of course this leads us into the mess we are now in. How do we get back to the status quo of having 3 directors retiring each year?

My suggestion is that the person who was co-opted to the Board to fill the vacancy two years ago, who should have stepped down last year and didn't, should step down this year. This will then leave 3 full vacancies to be filled. The problem is he will not step down and has the backing of the Chairman who says that Clause 19.6 is the reason! Talk about collusion!

Your views, as ever, will be most favourably received.

 

[buying_it]

Are you a member of the Institute of Directors? They offer a free legal advice service which seems to be what you need at this point.

Another way to look at this is - what outcome do you want from your actions?

If it is the removal of this 'temporary' director you would be best focusing your attentions on this - (if he has never been elected at an AGM or confirmed in post this may give you some room for manoeuvring)

If it is the preservation of your position - you need to start building your case as too why one of the other directors should be removed from their post. What is the connection between the temp director and the chairman?

I agree that it sounds like there is collusion - but the board will not function without trust & integrity. You could always table a motion to discuss the current situation. Confrontation is always an interesting way of finding out who the blaggards are in any situation.

Andy.

 

[Fotoman]

Thanks for that.

The situation, thankfully, has now now been resolved. The person concerned has now agreed to stand down this year and apply for re-election.

This will now bring us back to the status quo of 3 directors retiring each year.

The problem was caused by the members being told, 2 years ago, that there were 4 vacancies instead of three. This was the bit I thought was not correct. There should have been only 3 vacancies in keeping with our Articles of Association. The 4th vacancy should only have been temporary for one year.

Anyway, I shall ensure that any future director who resigns during his term of office will now be replaced by a temporary director who will serve only for the remaining period.

Many thanks for taking the time to help.

Great Forum. I shall be a regular visitor.

 

[buying_it]

I am glad to hear it has been resolved and I look forward to see you around the forums!

If there is anything I can ever do to help...

Andy