Page 910 - (A) Mammoth (998pp)

6. Notification is received by the company from the director that the director is resigning from office, and such
resignation has taken effect in accordance with its terms
Regulation 81 of Table A provides that the office of a director shall be vacated if:
1. He/she ceases to be a director by virtue of any provision of the Act or he/she becomes prohibited by law from being a director, or
2. He/she becomes bankrupt or makes any arrangement or composition with his creditors generally, or
3. He/she is, or may be, suffering from mental disorder and either:
i. He/she is admitted to hospital in pursuance of an application for admission or treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or
ii. An order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his/her detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his/her property or affairs, or
4. He/she resigns his office by notice to the company, or
5. He/she shall for more than six consecutive months have been absent without permission of the directors from meetings of the directors held during that period and the directors resolve that his office be vacated
Other grounds may have been added to the Articles or provisions inserted to make it easier to remove a director.
It is important to note that removing a director can give rise to employment related issues in certain circumstances.
Disqualification
A Court can make a disqualification order prohibiting an individual from acting as a director of a company under the Company Directors Disqualification Act 1986.
If the director is removed from office, this will not usually affect the director's position as a shareholder in the company, should he or she be one. This is frequently of significance in private companies, where often a director is also a shareholder. Generally the only solution is for the purchase of the former director’s shares to be negotiated.
In certain circumstances, the removal of the director may be grounds for petition under section 994 of the Companies Act. Section 994 allows a shareholder to petition the court on the grounds that the affairs of the company are being conducted in a manner which is unfairly prejudicial to the shareholders or a group of them.
Under this section the Court may order the remaining shareholders or the company itself to buy the former director’s shares.
Sometimes a company’s Articles will contain a clause that a shareholder who ceases to be a director is deemed to have given the company a transfer notice in respect of his or her shares, so that the shares can, in effect, be compulsorily acquired.
Disputes within a company can prove fractious and time consuming, serving only to harm the business. This area of law is detailed and complex.
Sue Grabbit & Run has a team of experienced Commercial Litigation Law solicitors who can deal with company disputes efficiently and effectively.