The short answer is yes. Shareholders appoint directors to make management decisions for a company on their behalf. Although, sometimes disagreements may arise, causing shareholders to lose confidence in a director. Shareholders may then wish to remove that director. This article will explain how shareholders can remove a director from a company, and how the removal process differs between private (proprietary) and public companies.
Resignation of a director
Before getting to the removal process, it is worth noting that a director may choose to resign from the position.
In order to do so, the director must provide a written notice of resignation to the company’s registered office. The director may also provide ASIC with written notice of the resignation accompanied with a copy of the letter of resignation given to the company. If not, the company must inform ASIC of the resignation within 28 days.
Removal of a director
The removal process will depend on a number of things. First, you need to consider whether your company is private (proprietary) or public, as different rules will apply to each. Then, you need to consider whether your company has its own constitution or shareholders agreement. If not, the replaceable rules under the Corporations Act 2001 (Cth) will likely apply. Either way, you should carefully follow the procedure and requirements relevant to your company.
Private (proprietary) companies
For private (proprietary) companies, shareholders can remove a director by passing a resolution at a meeting. Another person may be appointed as a director in their place.
Alternatively, if the constitution allows, other directors (by majority) can also remove a director.
However, a director can’t be removed if the company does not have at least one other director, unless the company is winding up and that process has already begun.
Public companies
For public companies, shareholders can also remove a director by passing a resolution at a meeting, even if the company’s constitution or shareholders agreement says otherwise. However, unlike private (proprietary) companies, a director of a public company can’t be removed by another director.
Shareholders seeking to remove a director must provide two months’ notice of the resolution to the company before the meeting takes place. Though, if shareholders call a meeting after the notice is given, the resolution can still be passed with less than the two months’ notice.
Shareholders must also inform the director in question of this as soon as practicable. The director will have the right to respond by providing a written statement or presenting an oral case to the shareholders at the meeting.
Conclusion
In summary, shareholders can remove a director from a company. The rules governing the removal process will depend on a variety of factors. You should consider whether your company is private (proprietary) or public, and whether your company has its own constitution or shareholders agreement. Generally, shareholders can remove a director by passing a resolution at a meeting. However, you must carefully follow the rules and requirements relevant to your company.
If you need any further information or assistance, you can contact a company lawyer today.
