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Strict procedures must be followed if you want to remove a director from a limited company. To ensure compliance with contractual agreements and company law, and to avoid the potential for legal claims, you must ensure that any termination of a director’s appointment is just. Below, we discuss the different options available to you and the steps you need to follow to remove a director.
The easiest solution, which we recommend in the first instance, is to broach the subject of voluntary resignation with the director and offer a severance package. Otherwise, you can remove a director in one of three ways:
- under the articles of association
- using the statutory procedure in the Companies Act 2006
- disqualification by an authorised third party
Unless the removal of a director is by disqualification order from an authorised body, you must refer to your company’s articles of association and shareholders’ agreement (if applicable) before making a decision.
1. Remove a director under the articles of association
Under the Model articles of association, the board of directors or a majority of the members can serve written notice to remove a director if:
- that person ceases to be a director by virtue of any provision of the Companies Act 2006 or is prohibited from acting as a director
- a bankruptcy order is made against that person
- composition is made with that person’s creditors generally in satisfaction of that person’s debts
- a registered medical practitioner who is treating that person gives a written opinion to the company that the director has become physically incapable of carrying out the role and he or she may remain so for more than three months
- notification is received by the company from the director stating their resignation from office, and that such resignation has taken effect in accordance with its terms
In such instances, there is no need to make a decision on the matter. The law requires the director to be immediately removed from office. If a company has only one director, a new director must be appointed as soon as possible – ideally before the current director is officially removed from the company register.
2. Remove a director by ordinary resolution (the statutory procedure)
Where the articles do not cover the cause for removal, you may call a general meeting of the members (shareholders or guarantors) to vote on the matter and pass an ordinary resolution. This statutory procedure, prescribed by the Companies Act 2006, requires a ‘simple majority’ vote (over 50%). It is not possible to use a written resolution to remove a director.
The member who proposes the dismissal must give the company ‘Special Notice’ of a resolution to remove a director at least 28 days prior to the meeting at which the director may be removed. The director in question should be given a copy of the notice. They will be permitted to attend the meeting and make representations.
Minutes of the meeting should be taken. A copy of both the minutes and ordinary resolution must be kept at the company’s registered office or SAIL address. The company’s statutory register of directors should be updated to reflect the dismissal.
Companies House must also be notified of a director’s removal within 14 days of the resolution being passed. You can do this online using Form TM01 or via Rapid Formations’ free Client Admin Portal.
3. Director disqualification by an authorised body
Directors can be disqualified if they fail to maintain their legal responsibilities and their conduct is deemed ‘unfit’ by any of the following bodies:
- The Insolvency Service
- the Courts
- Companies House
- the Competition and Markets Authority (CMA)
- a company insolvency partner
The Insolvency Service offers the following examples of unfit behaviour that often result in director disqualification:
- continuing to trade to the detriment of creditors at a time when the company was unable to pay its debts
- failing to keep proper accounting records
- failing to prepare and file annual accounts or confirmation statements for Companies House
- using money or assets belonging to the company for personal benefit or gain
- failing to co-operate with the Official Receiver or Insolvency Practitioner
- failing to submit tax returns or pay over to the Crown tax or other money due
When a complaint is made against a director, they are notified about the allegations in writing. The director is then given three options:
- wait to be taken to court for disqualification
- defend the allegations if they believe them to be untrue
- by voluntarily disqualifying themselves to prevent any court action
If a director is declared bankrupt, served with a Debt Relief Order, or subject to any bankruptcy restrictions, the only outcome is an immediate disqualification.
Following disqualification, the director’s details are added to the Disqualified Directors Register at Companies House. This information is a matter of public record that remains in place until the period of disqualification ends, which could be anywhere from 2-15 years.
Can I resign as a company director?
You can resign as a company director for many reasons, such as retirement, ill health, moving to a new job, or being asked to step down from the position.
Resign as a co-director
If you are a co-director, there is no legal requirement for the company to appoint a replacement director when you leave. Private companies can be managed by just one director. However, the members may deem it necessary to appoint a new director if your departure is likely to affect the commercial and operational requirements of the business.
Resign as a director – sole director
If you are the sole director and shareholder of a solvent limited company, you have a number of options for your exit strategy:
- continue to own the business and appoint a new director to manage it on your behalf
- dissolve (close) the company and sell all of its assets
- sell the business and its assets to someone else as a going concern
Prior to making any such decision, you should always seek professional legal advice.
If you choose to appoint a new director to manage the business on your behalf, you can continue to own the company as a shareholder. This will allow you to maintain overall control and receive profit distribution through dividend payments. You will need to pay the new director, so you be sure of the viability of this option.
Alternatively, you can simply close or sell the business. Your limited company is a distinct legal entity, so you can transfer ownership or sell the business to someone else. You would have no further involvement once the transfer or sale is complete.
Appointing a replacement director
If you decide to maintain ownership of the company, you can also appoint a successor to run day-to-day business affairs on your behalf. A limited company must always have at least one human director, so you will have to appoint someone before resigning.
The role of director is an important and responsible position. You must ensure that any new individual has the skills and knowledge to carry out the required duties and responsibilities. As the owner of the business, you can stipulate the extent of the new director’s powers in the articles of association.
You must inform Companies House when a new director is appointed. This can be carried out online using Form AP01 ‘Appointment of director’. After the details of your new director have been registered, you can resign as a director and notify Companies House on Form TM01 ‘Termination of appointment of director’.
Closing your company
You may decide that closing your company is the best option. If the business is solvent (i.e., it can pay all of its bills), has paid all outstanding bills, and has not traded in the past 3 months, you can apply to have it struck off the Companies Register. To facilitate the legal closure of your company, you must fulfil a number of requirements, such as:
- informing all parties that may be affected by the closure of the business
- contacting HMRC and paying any taxes owed
- filing the final annual accounts and Company Tax Return
After all assets have been sold and all liabilities have been paid, the remaining capital is yours to keep. Companies House will advertise the application for closure in the local Gazette for your region. Provided no objections are raised, your company will be struck off the register within 3 months. When this happens, the company will cease to exist.
Selling your company
Selling an existing company depends on many factors, for example, the current financial climate, market conditions and trends, the value and viability of your business, and the potential buyer profiles at the time you decide to sell. Your business should show signs of minimal risk to any potential buyer. It should have:
- a proven track record of consistent profitability
- an established customer base
- a strong reputation and brand image
- a positive forecast for future earnings, sustainability, and growth
- the ability to withstand a change of ownership
The decision to sell requires a great deal of research, planning, and patience. It is highly unlikely that you will sell your business in an instant, particularly if you want to get a fair market value.
Resignation may take a lot longer if you choose this route, but it could also prove extremely lucrative. There are many legal, financial, and administrative factors to be aware of, so you must consult an accountant or professional business advisor before taking any steps toward selling your business.
Notifying Companies House about the removal of a director
Informing Companies House about the removal of a director is a relatively simple process. You can use Rapid Formations’ free Online Admin Portal to deliver this information instantly and securely.
If you are an existing client, simply click on ‘Client Login’ on the top left-hand side of our website to update and submit the required information. Non-clients can create a free account, import an existing company, and update the necessary information thereafter.
Once your company has been registered on our portal, you will be able to view and manage your company details at any time, report changes to Companies House, view statutory filing deadlines, download company formation documents, and file Confirmation Statements and resolutions.
I am a director of a private company limited by guarantee without share capital
Community Interest Company (CIC), I am a person with significant control (PSC), can I remove another director who also has a person with significant control (PSC), by the way we are three directors and we all have a person with significant control (PSC).
Thank you for your kind enquiry, Mike.
Unless there are specific provisions placed within the company’s articles, any removal of a director is likely to be carried out by the members (in this case the guarantors) under section 168 of the Companies Act 2006. This section provides that a director can be removed by an ordinary resolution (greater than 50% of the votes cast in favour), provided special notice is provided for their removal. The procedure for this is very strict and great care has to be taken in its use, so we would always recommend seeking professional advice before using it.
We trust this information is of use to you.
Kind regards,
The Rapid Formations Team
Hi
I recently set up a ltd company with a friend
We are both equal shareholders and directors
However it is not working out
How do I go about removing him from the company?
Thank you for your kind enquiry, Mark.
Unfortunately, there is no easy way of removing the other shareholder or director from the company, as you would require over 50% of the shareholders to agree to an Ordinary Resolution removing the other person as a director. In relation to the other person’s shares, unless you have a specific shareholders’ agreement, it will be up to that shareholder as to whether they wish to sell their shares to you or somebody else.
We would suggest in this instance that your easiest bet is to resign yourself as a director of the limited company and form a new limited company with yourself as the sole director and shareholder.
We trust this information is of use to you.
Regards,
Rachel
Dear Rachel,
In what situation we need 50%++ or 75% majority to remove a director? I am confusing. Given that we got EGM in two week time, purpose to remove two of the existing three directors and adding in two new directors.
Thanks.
Thank you for your kind enquiry, William. If the articles of association of the company in question do not cover the cause for removal of a director, you should call a general meeting of the members (shareholders or guarantors) to pass an ordinary resolution. You will require a simple majority vote of over 50% of the share ownership in order for an ordinary resolution to remove the director to be passed.
I trust this information is of use to you.
Kind regards,
Rachel
Hi Rachel,
We have three directors with equal shares. Can we remove one of the directors if two of us vote in favour? Our combined % shareholder stake would be 65 (ish) overall.
Thank you for your kind enquiry, Shona.
You should call a general meeting of the shareholders or guarantors to vote on the matter and pass an ordinary resolution. This requires a ‘simple majority’ vote (over 50%) in order to be passed. Given what you have described, the two other shareholders should have enough voting rights to be able to pass a simple majority.
The member who proposes the dismissal must give the company ‘Special Notice’ of a resolution to remove a director at least 28 days prior to the meeting at which the director may be removed. The director in question should be given a copy of the notice, and he or she will be permitted to attend the meeting and make representations.
Minutes of the meeting should be taken. A copy must be kept at the company’s registered office or SAIL address with a copy of the resolution. The company’s statutory register of directors should be updated to reflect the dismissal.
Companies House must also be notified of a director’s removal within 14 days of the resolution being passed. You can do this online using Form TM01 or via Rapid Formations free Admin Portal.
I trust this information is of use to you.
Kind regards,
Rachel
Good evening
Please kindly help me i a very ambiguous situation I find myself in.
My friend has an ltd and he was disqualified as a director and asked me, more than a year ago to be the director for the company he is actually controlling and managing; I have never signed any cheques nor been involved in any decisions or anything of sorts, just agreed and never acted as such.
Now, the company is under investigation for reasons unknown to me, and I wouldn’t want to find myself into the position to be legally responsible for any outcome that may occur. Is there any legal way to strike off myself as a director from the moment I was actually named and be out of this unwanted and, unfortunate situation I have put myself in, honestly, not knowing exactly what I got myself into, right from the beginning. I was thinking I was helping out a friend, but I wouldn’t want to have any legal problems because of this.
What is the best way to protect myself, please, since I have never acted as a director nor have had effective control of the company.
Best regards
Shaher
Thank you for your kind enquiry, Shaher.
It is illegal for a disqualified director to act as a director of a company or control or manage a company, unless in a rare circumstance they have permission to do so via a Court Order. It may also be illegal for somebody else to knowingly act as a nominee for a disqualified director.
As you have been appointed as a director of the company, you are legally responsible for the running of the company. If you are the sole director, you will be legally responsible for any illegal acts the company may have committed during your tenure. If you are a shareholder of the company, you are ordinarily protected to limited liability for the company debts up to the nominal value of the shares you own, should the company be wound up. Please note that this does not necessarily apply in cases where you are prosecuted through the courts for wrongful or fraudulent actions.
It is not possible to resign yourself as a director from the point you were appointed as the director of the company – the furthest you can backdate a resignation is 14 days from the day you submit the relevant paperwork to Companies House. It is also not possible to resign yourself as a director if you are the only director of the company. If there is more than one director in the company, you will be able to resign as a director by the majority of members’ passing a resolution and the relevant paperwork being filed at Companies House.
With regards any further action taken against you should the company have acted illegally, we would advise you seek professional legal advice from a solicitor.
I hope the above is of help to you.
Kind regards,
Tana.
Hello,
I am a director and 50% shareholder of an LTd. The other director has resigned me without my consent and now my status shows as ‘resigned’.
How can I complain to companies house about this keeping in mind that this issue will not be resolved with a meeting and that she’s taking major decisions without taking my permission in many issues.
Thank you
Hi Omniyah,
Thank you for your kind message.
A director can only be resigned by a Special Resolution of the shareholders, which requires at least 75% of the shareholders to agree to the removal of a director.
In the scenario you describe above, it would appear you have been unlawfully removed as a director, as no other party within the company could have over 75% of shares. Unfortunately, there is nothing Companies House can do under the current powers given to them under legislation to rectify this situation. We would therefore recommend you seek professional legal advice to rectify this matter.
Kind regards,
Rachel
Hi rachel we have a ltd company with 8 directors one of whom has put the company in jepordy by withholding important information from court oroceedings the remaining directors asked him to resign his post but he has stated he is leaving it up to us to have him removed can we simply remove him with majority votes we also nee to change the company address and email ascthey are in his name we all have equal shares
Hi J Drennan,
Thank you for your message.
To remove a director, you will need to call a general meeting and propose a resolution to the shareholders to remove the director from the company. Special notice of at least 28 days needs to be given for this general meeting, and the director you intend to remove should also be provided a copy of the notice. It’s very important the proper process is carried out, so you may want to seek legal advice.
Kind regards,
Rachel
Good Evening,
I am a director of a business with 2 equal sharing partners, 2 of us work very hard at our business and the other we have not seen in 4 months and has only contributed 1 hour a week max for the last 9 months.
Now the other 2 directors put in 18000 in set up money for my professional ability and background to run the business, I take a minimal wage if there is one and for the last 8 months earned only 5000 , where I normally could earn 20000,
Any how the director who has contributed 1 hour a week for 30 weeks wants to resign and wants investment money back, we never agreed any thing on paper and no records of anything really , just two hard working directors and 1 absent director,
Where do we stand as they want to resign but demanding money back and dividends,
We have not taken any dividendends and our bank is at a balance on 10 000 working capital.
How can I resolve this and also do we owe them money !,
Hi M. Bruce,
Thank you for your question.
Unfortunately, we are unable to answer this question for you. We recommend you speak to a solicitor or accountant in relation to your question. If you do not have an accountant, you can send an email to info@rapidformations.co.uk asking to be referred to an accountant, and we can arrange this for you.
Kind regards,
Rapid Formations Team
Hi Rachel,
I’m wanting to resign from a company I set up with a friend. The company has never been active, we are equal shareholders and both directors. I’ve completed a TM01 form with Companies House that has been accepted and I’m no longer appearing as a director with that company. However I’m still a shareholder but a little confused at how to put an end to that. Any advice would be appreciated.
It’s also worth noting that my business partner will not communicate with me in any way which is making things very difficult for me.
Many thanks
Hi there,
To remove yourself as a shareholder, you need to sell your share(s) to the other shareholder or back to the company, but this will not be possible if the director will not communicate with you. I’m afraid I cannot provide a solution because you need the director’s approval to do anything – I would suggest contacting Companies House for advice and to determine how to rectify this issue.
Best wishes,
Rachel
Hi
I apppinted my friend as a director without thinking anything and he has no impact on the business and does not involve himself in anything. He has moved to Dubai. How do I go about getting him off and it’s just me and him on the business.
Regards
Ali
Hi Ali,
You can remove your friend as a director by completing form TM01 ‘Terminate an appointment of director’. You can submit this form online via Companies House Webfiling service: https://www.gov.uk/government/publications/terminate-an-appointment-of-a-director-tm01
Once the form has been processed and Companies House notifies you of the change, you should update your statutory register of directors with the date of termination. You should also confirm the change when you deliver your next confirmation statement to Companies House.
I hope this clarifies matters.
Best wishes,
Rachel Craig
Hi Rachel,
My co director has recently destroyed his credit rating by missing a mortgage payment of a property he owns in his name. This now jeopardises our ability to refinance another property we jointly own through a limited company. I therefore need him to resign as a director and reduce his shares to less than 25% (?) by issuing additional shares to myself. This to remove the need to list him on the loan application (which would prompt background checks on him by the lender as a controlling party to if the borrower). As he will oppose these steps, is there a way to enforce this as I believe his irresponsible actions make him unfit to remain a director and jeopardise the survival of the business.
Hi Mark,
Thanks for getting touch.
This is a complicated and unusual issue. Do you know if this missed payment was a one-off, or have verification that his credit rating has been damaged? It would be usual for one missed payment to have such a significant impact if he is ordinarily up to date with his financial commitments.
It will be difficult for you to remove him as a director is he is an equal shareholder. Additionally, you may need his approval to issue more shares – it really depends on the provisions in your articles and shareholder’s agreement.
I’m afraid I can’t provide an answer for you on this occasion, so I would suggest speaking to a professional advisor or solicitor to determine your options.
Best wishes,
Rachel
Hello,
I recently formed a company with 2 friends, each of receiving a third of all shares and voting rights. One of those Directors has now resigned from the company by 3 way mutual consent. All 3 of us now want to work out how he can be removed from the company entirely with him having no ties or claims to any part of the company either now or in the future.
Is this possible as a solicitor has quoted us a huge amount of money that we just don’t have.
Thanks
Irene
Hi Irene,
Does the director who has been removed wish to relinquish his shares? If so, it’s simply a matter of him selling his shareholdings back to the company or to you and/or the other remaining shareholder. I don’t see any need for a solicitor if this is the case.
Best wishes,
Rachel
Hi Rachel,
Thank you for coming straight back to me, it is appreciated. Yes he wants to take himself off all association with the company as well. We went to a solicitor regarding this but it was way out of our budget. The solicitor mentioned that me and the other remaining director need Enhanced IP protection in order to ensure that there can be no future claims.
Also he doesn’t want any remuneration for the shares and so is it imperative there is a financial transaction at this point and if so what is the minimum it can be? We have been paying him a salary and so is it possible that he could sign something saying he accepts the salary he’s already received as settlement?
Thank you
Hi Irene,
No problem at all – glad to be of assistance.
I cannot offer any official advice or question the information provided by your solicitor; however, many directors and shareholders leave companies without the need for Enhanced IP protection. It’s entirely up to you.
If he does not want any remuneration for the shares, he can simply gift them back to you for no consideration money. You will need to complete a stock transfer form to do this: https://www.rapidformations.co.uk/blog/share-transfers-from-one-person-to-another/
Once the transfer has taken place, you must update your statutory register of members and notify Companies House on the next confirmation statement (previously the annual return). The register of directors should also be updated to reflect the date on which he resigned.
I don’t see any reason why you could not draft a document stating his agreement to relinquish future remuneration but, again, I’m not in a position to confirm whether it is sufficient for your needs.
Best wishes,
Rachel
Hello,
Can I be resigned from a business as a second director (30% company shares) without any notes?
I have been in the beginning of the business from 2007 with my partner… later we got married and now we are going for divorce . I only now founded out they he resigned me from the business in 2009 … I have not signed any documents and did not have any notes from this process.
Is it legal to do this? … because he holds 70% company share.
Please advice, if there anything would help me.
thanks
LA
Hello,
Thanks for getting in touch.
It depends on what is stated in the articles of association and what reason he had for removing you as a director. You really should have been notified at the very least; however, he may be within his rights to remove you as director because he holds the majority of shares.
However, I’m afraid I cannot give you a definitive answer because I do not know all the details. If you do not receive a satisfactory answer from him regarding the reason for your removal, you should consult a solicitor. Regardless of your removal as a director, you should still hold shares if you did not agree to sell them.
Sorry I cannot be of more help.
Best wishes,
Rachel
Dear Rachel Craig
I have a ltd company it is travel business i am director with 51 % share and my son is another director with 49% he has been taking money from the business for his own use the business is suffering financially he has refused to resign how can i move him from directorship
please advise
Hi Mohammed,
I’m very sorry to hear that you’re experiencing difficulties with your co-director. If he is refusing to cooperate and his actions are damaging the company, you can either:
1) Remove him as a director by passing an ordinary resolution – if your articles of association allow you (the majority shareholder) to do so.
2) Report him to the Insolvency Service: https://www.gov.uk/complain-about-a-limited-company
I hope you manage to resolve this issue soon. Best wishes.
Rachel Craig
Hi, Can I temporary remove myself as a Director for 6 months and then become a director again? I have conflicting business interests and will be free to concentrate on this business in 6 months time.
When I set the company up a month or so ago, I just dished out director roles without thinking.
Many thanks
Manj
Hi Manj,
The process of removing and re-appointing yourself as a director is really straightforward and should not pose any issue. However, are there other shareholders in the business who could oppose your re-appointment in 6 months?
For such a short period of time, you could just leave your appointment as it is and take a back seat in terms of your directorship duties – providing the other directors are happy for you to do so.
Either option is fine, but the latter would save you the hassle of reporting changes to Companies House and temporarily updating your statutory register of directors.
Let me know if this makes sense or if you need any more help with your decision.
Best wishes,
Rachel
Hello. Can I remove myself as a Director of a private company by using the online admin portal?
If so, how long will this take to be effective?
Fraser Clarke
Hi Fraser,
Yes, you can use the portal to remove yourself as a director. After you have submitted the request to Companies House, the company record should be updated within a couple of hours – the change will be effective when this happens.
I hope this helps, but please do get back in touch if you need any assistance.
Best wishes,
Rachel
I am Imran Gucci.I resigned from a company as a director in 2013. But still my name is there as a public disclosure with my all details.How to remove the resigned director name and appointment information from company house for good?
Dear Imran,
Are you still registered as a director, or are your details just available on public record as having been a previous director? I’m afraid you cannot remove your details from the public record completely. Your name and the dates of your appointment and resignation will always be visible to the public.
I hope this clarifies matters for you, but please get back in touch if you have any more questions.
Best wishes,
Rachel Craig