Appointing directors

Directors are most commonly appointed by shareholders at a company’s Annual General Meeting (AGM), or at an Extraordinary General Meeting (EGM).

If a vacancy on the board arises unexpectedly, the other directors can temporarily appoint a replacement director. This appointment must be confirmed by the shareholders in a general meeting as soon as possible.

Shareholders, or a committee of them, may delegate the power to appoint a new director to the existing directors.

In most circumstances, a proposal for a new director is not something shareholders and directors need to decide on immediately.

A company is required to inform Companies House within 14 days after the appointment of a new director.

Removing directors

A director can be removed by a 50% vote at a meeting of the shareholders. A single majority shareholder automatically carries over 50% so he or she alone can remove a director.

Anything contained in the director’s service contract or in the company constitution cannoy supersede this right. However, if a removal is in breach of a director’s service contract, or the terms of a shareholders’ agreement, the director has a right to pursue legal action for damages.

Common reasons for removal (a reason does not have to be given) include the following:

  • bankruptcy
  • breach of service contract
  • disqualification under the law
  • mental disorder under the Mental Health Act 1983
  • resignation from office or
  • absence from board meetings for a consecutive period of six months
John leads a global team at Integrity Governance that is focused on making boards more effective. A boardroom expert working with multinationals, SMEs, trade associations and not-for-profits, he provides practical, impartial advice to directors, business owners, executives and CEOs, to help improve board performance. He has 30 years of experience at director level in the corporate world, having worked at blue chip businesses including: Mars, Schroders and Goldman Sachs.

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