Question of the Week on Business Law – Removal of Directors before the End of their Term

The Companies Act 2006 introduced several changes with respect to the removal of directors from office before the end of their term. Here is an example of an MCQ which addresses some aspects of this matter.

Two directors of a private limited company are seeking a written resolution from the members of the company in order to remove a director from his post before the end of his term. The director in question believes the resolution must be a special resolution and passed at a meeting of the members, rather than by a written resolution. The articles of association of the company are silent as to the ways directors can be removed from their office before the end of their term.

Which of the following best describes the legal position?

A. A resolution to remove a director is a special resolution and must be passed a meeting.

B. A resolution to remove a director is a special resolution but can be passed by a written resolution.

C. A resolution to remove a director is an ordinary resolution, unless the company’s articles of association state otherwise, and can be passed by a written resolution.

D. A resolution to remove a director is an ordinary resolution, unless the company’s articles of association state otherwise, and can be passed in a meeting or by a written resolution.

E. A resolution to remove a director is an ordinary resolution according to the Companies Act and cannot be passed by a written resolution.

E is the best answer. A resolution to remove a director is an ordinary resolution according to the Companies Act 2006 (the Act) and cannot be passed by a written resolution. Generally, a resolution is an ordinary resolution unless the company’s articles of association state that a higher majority is required than in an ordinary resolution. However, there are some instances in which the Act states that certain decisions by the members are considered to be ordinary resolutions or special resolutions. When the Act states that an ordinary resolution is required – such as a resolution to remove a director before the expiration of his period of office (section 168 of the Act) – this is applicable despite any requirements of a higher majority being made by the company’s articles. The Act requires that a special notice will be given to the company at least 28 days before the meeting at which the decision to remove the director is moved. The Act also states that a resolution of a private company to remove a director or auditor before the expiration of their term in office may not be passed as a written resolution (section 288 of the Act).

 

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