If you’re considering removing a director, or if you are a director facing the prospect of being removed by your company, there are many tactics to consider to obtain the most favourable result.
Taking early legal advice from a solicitor who specialises in directors’ duties is essential, not only to obtain the best outcome you can, but also to reduce the mental and emotional stress that comes with the territory. After all, you spend more of your waking time at work than you do with your spouse and leaving a directorship has more in common with a divorce than you might at first think.
I have just published an article outlining tactics to consider, whatever side of the fence you’re on.
In summary, a director in an SME usually has three different legal roles and the legal position of each is different. The roles are being a director, being an employee and being a shareholder.
When considering the role of director, the first thing to look at is the company’s Articles of Association (which might set out procedures to follow). If not, the Companies Act specifies that a director can be removed by the shareholders and sets out the procedure. There are many things to consider including which shareholders can vote, how much voting power they have and whether anyone has a casting vote in the event of deadlock.
When considering the role of employee, the position is similar to other employees: fair procedures must be followed to avoid a claim for unfair dismissal.
When considering the role of shareholder, you will need to consider the Articles and any shareholders’ agreement. How are the remaining directors or company going to obtain the leaving director’s shares? What price should be paid?
No two situations are the same and it can be dangerous to remove a director without considering your legal position in full and tactics to employ.
Read the full article here.
For advice, whether you’re a company wanting to remove a director, or a director threatened with removal, contact Gary Cousins or by phone on 0845 003 5639.
Gary Cousins
Business Solicitor
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.