Appointing and resigning company directors - a how to guide
The make up of a company’s board of directors will vary from company to company. There are certain requirements in the Companies Act 2006 (“the Act”) that govern how many directors a company must have and generally speaking that number is at least one for a private limited company, and two for a public limited company.
In all cases, at least one director must be a natural person. The Small Business, Enterprise and Employment Act 2015 contains provision to prohibit the use of corporate directors, save for very limited exceptions. However these provisions have yet to be enforced, so for the moment it is permissible to have corporate directors in office.
A company’s articles of association will contain information on the minimum and maximum number of directors which the company can appoint.
In our guide we cover:
- Can anyone be a director?
- How do I become a director?
- Who is notified of my appointment?
- Ceasing to be a director
- Further information on changes to your board
Can anyone be a director?
There are certain criteria which must be satisfied in order to be eligible to be appointed as a director. The potential director:
- must be at least 16 years of age at the date of appointment;
- cannot be bankrupt or subject to any bankruptcy proceedings; and
- cannot be subject to a current disqualification order.
It’s also important that potential directors have the appropriate skills, experience and knowledge of the company to enable them to discharge their duties and responsibilities effectively.
How do I become a director?
The process for the appointment of new directors will be set out in the company’s articles of association.
Appointments may generally be approved by the board of directors, or in certain circumstances by passing an ordinary resolution of the members of the company. If the articles make no provision for the appointment of directors, the members have an inherent power to appoint directors by ordinary resolution.
Appointments can also be made by the court, for example ordering the appointment of a director to remedy an unfair prejudice claim. The courts have wide discretion in this area, however, to date, have been reluctant to exercise their power in this way.
Who is notified of my appointment?
The Act requires any new director to give express consent to their appointment as a director and this is notified on their appointment form when filed with the Registrar of Companies.
The Act requires that the notification to Companies House advising of the appointment be made within 14 days of that appointment taking effect (which would generally be at the time the board of directors or members approve the appointment). This can be done electronically or on paper.
The company secretary is responsible for attending to the notification to Companies House and also making the relevant entries to the company’s statutory registers. Where a company has not appointed a secretary, this responsibility lies with the directors.
Ceasing to be a director
There are various circumstances which would result in a director’s appointment ending, ranging from resignation, through to removal under provision in the Act.
Unless otherwise stated in the company’s articles of association, a director can resign at any time by delivering a resignation letter to the company at its registered office.
On receipt of a resignation letter, the company is required to notify the change to Companies House within 14 days and to make the necessary entries in the statutory registers of the company. The company secretary would generally be responsible for ensuring these actions occur.
Removing a director is a more complex and time-consuming activity. However the Act does afford members the right to remove a director if they choose to do so, by way of ordinary resolution. The director is given the right to attend and speak at the general meeting which proposes their removal – this being one of the few resolutions which requires a physical meeting to be held.
Once the resolution is approved, the notification and recording process mirrors that of a resignation.
Further information on changes to your board
We hope this provides you with a helpful summary of the steps involved in appointing and resigning directors, the considerations and process. This guide is not legal advice, but should you require any further advice or assistance, please do not hesitate to contact us.
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