How Can I Remove a Director of my Company?
Sometimes, the only way to secure the best interests of a company is to remove a director. Here's how to do it the legal way.
Directors play an important role in a company and have multiple responsibilities. But sometimes directors do not fulfil these responsibilities and do not perform their duties adequately. Sometimes, removing them from the company is the only way to ensure the interests of the company and its shareholders are being protected. There are several ways in which a director may leave a company. Examples include resignation, invalid appointment, removal by members, breach of provisions, death etc. These are usually outlined in the company’s constitution, so this is generally a good place to start. Sections of the Corporations Act 2001(Cth) deal with the Resignation, Retirement or Removal of Directors.
How Can I Remove a Company Director?
Directors may be disqualified by ASIC or the Court if they breach the Corporations Act, especially on multiple occasions. They can also be disqualified if they have been convicted of a serious offence. The provisions and offences outlined in the Act typically deal with mismanagement of the company and insolvency.
Removal from a Proprietary Company
If your company is a private company then usually a removal of a director is done according to the company’s constitution. This is done by resolution or by majority vote of the board of directors, or in a specific way outlined by the constitution. Section 203C of the Corporations Act is a replaceable rule and may be used if there is no constitution or if it is insufficient. In the case of using the rule in the Act, the members of the company can remove and replace a director by resolution. If removal of a director is done this way then you need to take into account their employment terms to ensure they are not being unfairly dismissed.
Removal from a Public Company
Removal of a director from a public company can be more complicated than a private company. The replaceable rule applies (regardless of the company’s constitution), however only a majority vote of shareholders can remove a director. If you are a director then you do not have the power to remove another director. A notice of intention to remove a director must be issued to the company at least 2 months prior to the resolution. After this, the director is given the notice too. The director then has an opportunity to make a statement for their case, which is to be made at the resolution meeting.
After removing a director from your company, you will need to notify ASIC within 28 days by making changes on their website. You can only do this if you are an officeholder. Follow this link: Company Officeholders
Removing directors can be complicated and sometimes messy, but it might be necessary to the company and shareholders. When undertaking this task, make sure you follow the guidelines according to which type of company you are a part of. When in doubt, refer to the relevant sections of the Constitution Act 2001. Make sure everyone involved is notified, especially the director being removed and ASIC. For further advice from an expert business lawyer, head to: Business Lawyers
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Akira is a legal intern at Lawpath working in the content team. She is currently studying a Bachelor of Arts and a Bachelor of Laws at Macquarie University.