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