Appointing and Removing Company Directors 101
There may be a number of reasons you’ll want to remove your existing company director and/or appoint a new individual to the role. Whether you’re planning a major reshuffle at the top for the sake of changing course of your limited company’s ethos, or an individual is underperforming, to appoint and remove a company director from the vantage point of your business address is a major decision.
To help you make an informed decision, and to complete the process to appoint and remove a company director swiftly, this article outlines the roles and responsibilities of a company director followed by the correct process to appoint and remove a company director from your limited company.
Who Can Become a Company Director?
Before understanding how to appoint and remove a company director, it’s important to recognise the eligibility of a company director.
The following can qualify as a company director:
- an individual (can be the company secretary, shareholder)
- a corporate body
- a partnership
- a group
- another limited company
- an organisation/business/charity
The following are not allowed to become company directors:
- a company auditor
- a banned company director (cannot be a director of another company while their forbid is still in place)
- individual under the age of 16 years
- an un-discharged insolvent
How to Appoint a Company Director
You can appoint a company director during and after your company incorporation and the process may not be as difficult as you may first assume:
Appoint a Company Director During Incorporation
The company’s maiden directors are appointed during company formation. Their details are provided to Companies House on the relevant documentation. You can register a new company and appoint the first directors with the use of Companies House form IN01, or you can complete an online application form during your company set up through a formations company.
Appoint a Company Director After Incorporation
It’s up to company members to decide who they want to appoint as a company director as well as specifying the powers that this new director will have.
Should the current directors be permitted to choose a new director, they will be expected to pass a resolution at a board meeting or in writing. Additionally, a majority of the directors must vote in favour of the resolution. In case there are just two directors, both of them must accept the appointment.
After the appointment has been authorised, the company secretary or the present director will have to inform Companies House within fourteen days of the decision. The following information must be submitted to Companies House on the company formation application or the “appoint a director” form AP01:
- Appointment Date
- Title and complete name
- Old names
- Birth date
- Business profession
- Country of residence
- Home address
- Service address
If you choose to appoint a corporate director, then the company must have at least one other natural personwho is a director. This has to be processed by submitting the following details on form AP02:
- Name of company.
- Company registration number (also found through a Companies House search).
- Appointment date.
- Registered name and number of the corporate director.
- Registered office or principal address of the corporate director.
- Corporate director’s place of registration.
When a director is appointed during or after incorporation, his/her occupation will be requested. Since the role is mainly administrative and managerial, directors do not need formal qualifications, and incidentally, directors may have specific professions or business occupations in addition to their directorial role. Therefore, you can list a director’s occupation as a specific profession where applicable.
How to Remove a Company Director
There are a number of reasons why you may need to appoint and remove a company director, and although removing a company director is not always the easiest decision to make, it may serve to be crucial for the success of your business.
Company directors can resign or be removed by company members (shareholders or guarantors) at any time as long as they do not encroach set provisions in the Companies Act 2006, the articles of association or a director’s service contract.
Remove a Company Director Through Voluntary Resignation
If you request a director to take a voluntary resignation or he/she resigns in adherence to their contract, Companies House has to be notified online or by post using Form TM01 within 14 days of the resignation. The company’s statutory register of directors must be updated according to the resignation and subsequently, the public register will be updated in relation to the new circumstance.
Remove a Company Director Under the Articles of Association Provisions
The model articles of association detail the various provisions required for the immediate removal of a director in the following scenarios:
- A provision of the Companies Act 2006 or any other UK legislation prohibits a director from remaining in office.
- A director has a bankruptcy order against his/herself.
- A registered medical practitioner deems a director physically incapable of exercising their position as director.
Remove a Company Director Through Ordinary Resolution of Members
If the articles of association do not cover the reasons for a termination, then the shareholders may remove a director through the passing of a resolution. This is normally practised when the shareholders are not content with a director’s performances or actions. As long as the shareholders do not violate any legislative or contractual agreement, an ordinary resolution with a simple majority vote will suffice.
In order to do this, a Special Notice of at least 28 days before the vote is taken at a general meeting must be given to all shareholders. The director in question should also be notified in order to make representations and attend the meeting. If the majority vote in favour of the director to be removed, then form TM01 must be filed at Companies House within 14 days.
Remove a Company Director Through Removal by Authority
The court, or another authoritative institution can remove a company director if he/she fail to fulfil their statutory duties and responsibilities, or if their conduct is judged to have been unfit or unethical; an official complaint may be made by a member of the public of another company member to the Insolvency Service. A “guilty” company director can also be disqualified by:
- Companies House
- Competition and Markets Authority
- Financial Conduct Authority
- A company insolvency practitioner
“Unfit” conduct is defined as:
- The continuation of company trading to the detriment of creditors (when a company is insolvent and unable to pay its bills).
- Failure of proper accounting documentation.
- Failure of proper filing of annual accounts and/or annual returns.
- Failure to process tax returns and/or pay tax liabilities to HMRC.
- Failure to co-operate with an insolvency practitioner or the Official Receiver
Remove a Company Director Through Disqualification
A disqualified company director is not allowed to hold another company director position in any other company for the duration of their ban (this can be up to 15 years).
Additionally, disqualified directors cannot take a similar position in a foreign company with UK links, be involved in forming, marketing or running another company, and he/she is not allowed to be a member (partner) in a Limited Liability Partnership (LLP). Any such violations can lead to a significant fine or imprisonment of up to 2 years.
Directors can be disqualified for:
- Failing to meet the minimum age requirement of 16 years.
- Declaring bankruptcy or involved in any bankruptcy proceedings.
- Are served with a Debt Relief Order.
- Continuation of trading during company insolvency (inability to pay its bills).
- Failing to maintain accurate accounting records.
- Failing to file annual accounts and/or annual confirmation statement at Companies House.
- Failing to pay taxes.
- Utilising company finances/assets for personal gain.
- Failing to fulfil statutory responsibilities in accordance with the Companies Act 2006.
What Roles Does a Company Director Hold?
When you want to appoint and remove a company director, it’s important to fully understand the roles of the position so that you appoint and remove the correct individual based on their adherence to the role’s responsibilities.
The duties and responsibilities of a company director are outlined in the Companies Act 2006, the articles of association, and any service contract that might be effective between a director and the company.
According to the Companies Act 2006, company directors must:
- Act within designated powers
- Promote the company’s success
- Carry out independent judgment
- Exercise reasonable skill, care, and diligence
- Avoid conflict of interest
- Reject third-party benefits
- Declare interests in proposed/existing transactions/arrangements with the company
When you want to appoint or remove a company director, you must ensure that you’re following the correct protocol and submitting the necessary details to Companies House.
It’s worth noting that If you’re the sole director of a company and want to resign, you can appoint another director to run the company on your behalf. Alternatively, for a solvent company, you can sell the business and its assets to another entity or choose to dissolve it and sell the assets.
To find out more about how to appoint and remove a company director, or how to obtain a registered office address for your business, contact our professional and experienced virtual office experts, today.