When a Director Falls Silent: A Lawful Route for Owner-Managed Companies

A director who stops attending board meetings, replies to correspondence or joins key decisions can bring a small company to a standstill. In an owner-managed business, the problem is often personal as well as practical. The remaining directors may feel let down, frustrated and uncertain about their own obligations.

The law provides a route through the problem, but it is not simply a matter of asking Companies House to change the record. Removal from office has its own procedure, and it sits alongside employment law, the company’s constitution and the commercial realities of a small shareholding structure.

Begin with the constitution, not the conclusion

Before taking any step, obtain the company’s articles of association and any shareholders’ agreement. These documents determine how directors may be removed and whether additional approvals are needed. The model articles for a private company limited by shares are common, but they are not universal. A bespoke articles document may contain different provisions, including reserved matters or enhanced voting thresholds.

A shareholders’ agreement may also impose obligations to consult, mediate or follow a deadlock procedure before a removal resolution is proposed. If it does, ignoring those steps can create a separate dispute even where the statutory removal route is available.

It is equally important to establish the director’s status. A person may be a director, an employee, a shareholder, or all three. Removing someone from the board does not remove their shares. It does not automatically end their employment either.

Removal from office is not the same as dismissal

A common mistake is to treat removal from the board as a dismissal from employment. The two are legally distinct. A director holds an office. An employee works under a contract of employment or a contract for services.

Removing a director under the Companies Act 2006 does not, by itself, terminate an employment contract. If the director is also an employee, the company must consider the notice provisions in the service agreement, any right to pay in lieu of notice, and the risk of an employment tribunal claim. An employee with at least two years’ continuous service may have unfair dismissal rights. Removing someone from the board in a way that breaches the employment contract can therefore turn a governance problem into a compensation claim.

Where the relationship has broken down, take advice on the employment position before the removal meeting. The two processes should be coordinated, not confused.

The statutory removal route

Section 168 of the Companies Act 2006 allows shareholders to remove a director by ordinary resolution at a general meeting. Special notice is required. This means the person proposing the resolution must give the company at least 28 days’ notice of their intention to move it.

The company must then give members at least 21 days’ notice of the resolution. The director concerned has the right to make written representations and to speak at the meeting. Those rights are not optional formalities. Overlooking them can make the process vulnerable to challenge.

A private company cannot use a written resolution to remove a director. A general meeting must be held. The company should check its articles on quorum, notice and voting. An ordinary resolution requires more than half of the votes cast by shareholders entitled to vote.

This is where small companies can encounter deadlock. If the disengaged director holds 50 per cent of the shares, or if the remaining shares are split in a way that prevents a majority, the statutory route may not deliver a clean result. A shareholders’ agreement may contain a casting vote, a deadlock mechanism or a buy-out procedure. Without one, negotiation or mediation may be more realistic than forced removal.

Board meetings and the limits of director power

The board can manage day-to-day company business, but it cannot usually remove a fellow director unless the articles expressly say so. Under the model articles, directors may appoint additional directors, but removal by shareholders is the statutory route. A board meeting may be useful to accept a written resignation, record the absence and authorise practical steps, but it should not be used as a substitute for the shareholder process.

If the absent director has stopped engaging altogether, consider whether a resignation can be obtained. A signed letter of resignation is quicker, cheaper and less adversarial than a removal resolution. It should be clear about the date of resignation and the offices held.

Companies House filings and internal records

Once a director leaves office, the company must notify Companies House. Form TM01 is used to terminate an appointment. The filing should be made within 14 days of the change. The company’s register of directors must also be updated, along with any register of directors’ residential addresses if relevant.

If the departing director was a person with significant control, check whether a PSC update is needed. If a replacement director is appointed, form AP01 will be required. The company’s bank, insurers, accountants and key suppliers should be told about changed authority. Bank mandates often need separate attention because a director’s removal does not automatically alter them.

Deadlock, confidentiality and an orderly handover

Where shares are held equally, removal may be impossible without agreement. In that situation, the remaining director should not simply stop holding board meetings or bypass the constitution. A paper trail showing attempts to engage the absent director is valuable. Mediation, a share buy-back or a negotiated exit may be the practical answer. In more serious cases, legal advice should be taken on unfair prejudice or other remedies.

Confidentiality does not end when a director leaves office. A former director remains bound by duties of confidence in relation to the company’s confidential information. The company should ask for the return of documents, devices, keys and passwords, and should remove access to email, banking and IT systems promptly. If the director has restrictive covenants in a service agreement, those should be reviewed before any public announcement.

Finally, keep the tone measured. A removal resolution is a legal step, not a punishment. The remaining directors should record decisions accurately, avoid unnecessary criticism in correspondence and preserve documents that may be relevant if the matter is later challenged.

A final word

Removing an absent director is rarely pleasant, but it can be done lawfully and with dignity. Check the constitution first, separate office from employment, follow the statutory notice and meeting requirements, and deal with the practical handover. For a small company, a calm and documented process is often as important as the result itself.