A company may by ordinary resolution at a meeting remove a director before the expiration of his period of office, notwithstanding anything in any agreement between it and him.
Special notice is required of a resolution to remove a director in this way or to appoint somebody instead of a director so removed at the meeting at which he is removed.
Where special notice is required of a resolution, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved. The company must then, where practicable, give its members notice of any such resolution in the same manner and at the same time as it gives notice of the meeting.
On receipt of notice of an intended resolution to remove a director, the company must forthwith send a copy of the notice to the director concerned.
The director (whether or not a member of the company) is entitled to be heard on the resolution at the meeting.
Where notice is given of an intended resolution to remove a director under that section, and the director concerned makes with respect to it representations in writing to the company (not exceeding a reasonable length) and requests their notification to members of the company, the company shall, unless the representations are received by it too late for it to do so.
If a copy of the representations is not sent as required because received too late or because of the company's default, the director may (without prejudice to his right to be heard orally) require that the representations shall be read out at the meeting.
Copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person who claims to be aggrieved, the court is satisfied that the rights conferred by this section are being abused.
The courts have the power to make orders disqualifying company directors. The Secretary of State may also accept disqualification undertakings from directors. These have the same effect as disqualification orders, but do not need a court to be involved.
The rationale of these provisions is to maintain the integrity of the business environment. Those who become directors of limited companies should carry out their duties with responsibility and exercise adequate skill and care with proper regard to the interests of the company's creditors and employees. The disqualification regime is a powerful tool against those who abuse the privilege of limited liability. It applies not just to persons who are formally appointed as directors but to those who carry out the functions of directors.
Potential causes of disqualification include:
The minimum period of disqualification is 2 years and the maximum 15 years.
Unless he or she has court permission, the effect of a disqualification is that the person is disqualified for the period stated in the order or undertaking from:
The disqualified person and any person who assists them will be committing a criminal offence and is liable to be prosecuted if they breach the terms of a disqualification order or disqualification undertaking. He or she may also be held personally liable for all the debts of the company concerned that were incurred after they were involved in any role from which the person was disqualified.
A disqualified person can apply to the court for permission to act as a director or be involved in the management of a company while disqualified. The court may grant permission but will need to be satisfied that there are adequate safeguards to protect the public interest and may impose conditions.
The courts in England and Wales, Scotland and Northern Ireland inform the Registrar of Companies of every disqualification order and undertaking. This information goes onto a Register of Disqualified Directors, which is open to the public for inspection. A person's name is removed from the register at the end of the disqualification period.
The articles of association can also provide that in certain circumstances a director's appointment will automatically terminate.
The Model articles, for example, provide that a person ceases to be a director as soon as