The Removal of a Company Director - Cretins Ltd - Essay Example

Brief 3 – Removal of a Director Introduction The removal of a company director is a right or prerogative that belongs to the members of the company. This action may be done by an ordinary resolution in a general meeting of the members. A special notice is required for this resolution if a member intends to file the same. Upon receipt of that special notice, the company shall inform the concerned director, that is, the one whose removal is being sought. The said director, who may or may not be a member, is entitled to be heard during the meeting in which the resolution will be deliberated upon. He may also send written representations to the company in writing and may request that the members be given copies thereof. If the representations are received late, the director may instead ask that the said representations be read during the meeting. He may also be allowed to speak in the meeting on his protest against the intention to remove him as director. These are all provided for in Sections 168 (entitled Resolution to remove director) and 169 (entitled Director’s right to protest against removal) of the Companies Act 2006 (Companies Act 2006). Cretins Ltd. Going to Cretins Ltd. (or Cretins for short), the plan of Joan and Mike to remove Phillip out as a director of the company will depend on its membership structure. Whatever it is, the process will have to be in accordance with the afore-cited Sections 168 and 169 of the Companies Act 2006. If the only three directors, Phillip, Joan and Mike, are also the only members or shareholders of Cretins and they own the same number of shares, the process will be very simple. Since it will be a concerted effort of Joan and Mike, all they have to do is first requisition for a general meeting of the members where they will submit a resolution to remove Phillip. Pursuant to the procedural due process mechanism set out in Section 169, Phillip has to be served with a notice of the intended resolution to remove him. Phillip is entitled to submit written representations to protest against his removal. During the said meeting, Phillip is likewise entitled to speak out. At any rate, all these remedies available to Phillip will become moot and academic because Joan and Mike will ultimately vote for his removal as is their plan. The requirement of the law is an ordinary resolution which means that the vote of the members needed for the subject removal is a simple majority (THE FREE LIBRARY BY FARLEX). As stated, the circumstances in the preceding paragraph are on the assumption that Joan, Mike and Phillip have the same number of shares each. If they do not have, the scenario will be different. Let it be presumed that there are one hundred shares. Joan has twenty shares and Mike has twenty five shares. That will be a total of forty five shares for the two. Phillip alone, on the other hand, has fifty five shares. Under this situation, Phillip cannot be voted out and be removed as director because, as provided for in Subsection (1) (a) of Section 284 of the Companies Act 2006, the member is entitled to one vote for each share owned. There will be some more complications if there are other members in Cretins aside from Joan, Mike and Phillip. Under this circumstance, Joan and Mike cannot be sure if the other members will go their way, that is, if the two can garner enough votes such that they can obtain a majority during the meeting in which the resolution for the removal of Phillip will be taken up. It must be observed that Joan and Mike do not have sufficient grounds against Phillip for his removal from the directorship. In view of that, the duo will definitely have a hard time convincing and persuading the other members of the company to vote for the ouster of Phillip who has the right to have those members furnished copies of his written representations objecting to the move to expel him. As a matter of fact, Phillip is likewise allowed to speak out his mind during the meeting that will tackle his expulsion. It is apparent on the surface that, as of the moment, Phillip has not committed any act which may be considered anomalously to the detriment of the company or its interests and he can well defend himself before the general membership. Joan and Mike have to bear in mind that even if they succeed in causing the removal of Phillip as director, the latter may still be entitled to compensation due to him as director and in his other capacity in the company and to damages on account of the said removal as provided for in Sub-section (5) (a) of Section 168 of the Companies Act 2006. In sum, Joan and Mike must carefully weigh their options in the plan to expel or oust Phillip as director. The foregoing discussions pertain to removal initiated by members or shareholders. Joan and Mike, plainly as directors, cannot cause the ouster of Phillip from the directorship unless there is a stipulation in the articles of association (Halsbury’s, 2009, para 729). This means that if the articles expressly provide that a director can be removed by the other directors under certain circumstances, this power has been upheld by the courts (Bersel Manufacturing Co Ltd v Berry [1968] 2 All ER 552). In the cited Bersel case, the House of Lords enunciated that it was proper for the permanent directors for life to have the power to remove the ordinary directors by a mere written notice if such authority has been particularly specified in the articles of association. It is furthermore important to note that if there is a special proviso in the articles of association regarding weighted votes being considered in the removal of a director, the manner of determining the majority will become different (Bushell v Faith clause [1970] AC 1099). As between Mike, Joan and Phillip, the total weighted votes of the latter might even be possibly more than the votes of Mike and Joan combined together. References Halsbury, 2009, Laws of England, Lexis Nexis Butterworths, UK, 5th Ed. Retrieved 1 December 2009 from Lexis Nexis online database, 4th December. THE FREE LIBRARY BY FARLEX. [internet] Accessed January 5, 2010. Available at: ) Legislation Companies Act 2006. OPSI Office of Public Sector Information. [internet] Accessed January 6, 2009. Available at: Legal Authorities Bersel Manufacturing Co Ltd v Berry [1968] 2 All ER 552 Bushell v Faith clause [1970] AC 1099) Read More