Category: Dispute Resolution

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Can a company remove a director for mismanagement in the UK?

Yes. Under UK company law, you can remove a company director for mismanagement but doing so requires a strategic, well-documented approach to minimise risk and ensure compliance with the Companies Act 2006.

Director mismanagement may include:

• Breaching statutory directors’ duties.
• Failure to manage commercial and regulatory risks.
• Lack of strategic leadership or competence.
• Breach of fiduciary obligations.
• Poor financial oversight or misuse of company funds.

In my experience, once the relationship between a director and other board members deteriorates, trust is difficult to rebuild. Many companies wait too long to seek legal advice, increasing the chance of reputational and operational harm. If legal advice is sought early, non-litigious routes like negotiation or mediation may preserve company value and reduce tension.

When trust is lost entirely, the business may have no option but to proceed with formal removal, especially if shareholders are concerned about corporate governance, investor confidence, or regulatory scrutiny.

Can a director be removed without their consent in the UK?

Yes. A company director can be removed without their consent under UK law. Section 168 of the Companies Act 2006 gives shareholders a statutory right to remove a director by ordinary resolution, regardless of any agreement between the director and the company.

This means that:

• The director’s approval is not required.

• The board itself cannot prevent removal if shareholders hold a majority vote.

• Any provision in the Articles of Association or service contract attempting to block removal will generally be ineffective against the statutory power.

However, removal without consent does not eliminate contractual rights. A director may still bring claims for:

• breach of contract,

• wrongful dismissal, or

• unfair dismissal (if also an employee).

For this reason, companies should treat removal as both a corporate governance decision and a potential employment law process, ensuring procedural fairness throughout.

Removing a director for misconduct or mismanagement

Directors may be removed where misconduct or serious mismanagement undermines the company’s interests or breaches legal duties owed under the Companies Act 2006.

Examples of misconduct may include:

• Breach of directors’ duties under sections 171–177 Companies Act 2006.

• Conflicts of interest or undisclosed personal benefit.

• Misuse of company funds or assets.

• Regulatory non-compliance exposing the business to risk.

• Persistent failure to exercise reasonable care, skill, and diligence.

While UK law does not require shareholders to prove misconduct to remove a director under section 168, establishing clear evidence is often strategically important. Proper documentation helps:

• justify the decision to investors and stakeholders,

• defend potential employment tribunal claims,

• reduce the risk of unfair prejudice allegations by shareholder-directors.

In practice, companies should gather board minutes, financial records, internal complaints, and correspondence demonstrating the impact of the director’s conduct before initiating removal proceedings.

Section 168 Companies Act 2006 explained

Section 168 of the Companies Act 2006 is the primary legal mechanism allowing shareholders to remove a company director before the end of their term of office.

Key features of section 168 include:

1. Ordinary resolution required
A simple majority vote (over 50%) of shareholders is sufficient.

2. Special notice procedure
Shareholders proposing removal must give at least 28 days’ special notice before the meeting.

3. Director’s procedural rights
The director has the right to:

• receive notice of the resolution,

• submit written representations, and

• speak at the shareholder meeting.

4. Statutory power overrides company documents
Even if the Articles of Association or a shareholders’ agreement provide otherwise, section 168 generally prevails.

Importantly, section 168 deals only with removal from office, not compensation or employment termination. Separate contractual obligations may continue to apply after removal.

Because procedural mistakes can invalidate the resolution or trigger claims, companies should ensure strict compliance with statutory notice and filing requirements, including submitting Form TM01 to Companies House promptly after removal.

What are the legal grounds for removing a director in England and Wales?

Removal by ordinary resolution (section 168 Companies Act 2006)

Shareholders can remove a director by passing an ordinary resolution with a simple majority (51%). To begin the process, members must serve a Special Notice at least 28 days before the shareholder meeting.

The director:

• Must be given formal notice.
• Can submit written representations in support of their position.
• Has the right to speak at the meeting.

The company is also required to file Form TM01 with Companies House once the director is removed.

Court-ordered removal

If the company has evidence of unfair prejudice under section 994 Companies Act 2006, the shareholders may apply to court for relief. If successful, the court can order the removal of the director. However, the courts rarely grant this remedy unless the Claimant’s can show serious misconduct or abuse of power.

Voluntary resignation

Provided the company’s Articles of Association, Shareholders’ Agreement, and the Director’s Service Agreement allow it, a director may resign voluntarily. No notice period is typically required, although contractual obligations may still apply.

The process: how to remove a director for mismanagement

To remove a company director for mismanagement, follow these steps:

1. Review company documents
   Examine the Articles of Association, Shareholders’ Agreement, and Directors’ Service Agreement. These may specify grounds and procedures for removal.
2. Serve Special Notice (28 days)
   Give the company at least 28 days’ notice before the shareholder meeting. The notice must detail the proposed removal and be formally delivered to the company.
3. Inform the director and consider their submissions
   The director has a right to submit written arguments and attend the meeting. Their representations should be read out if they cannot be circulated.
4. Pass an ordinary resolution
   If more than 50% of shareholders vote in favour of removal, the resolution passes.
5. File Form TM01 with Companies House which removes the director from the official register.

Risks of improperly removing a director

Removing a director for mismanagement is not without legal and reputational risk.

Employment law consequences

If the director is also an employee, dismissal may trigger an unfair dismissal claim. To avoid liability, the removal must fall within one of the five fair reasons for dismissal:

• Capability or qualifications.
• Conduct.
• Redundancy.
• Illegality (continued employment breaches the law).
• Some other substantial reason (SOSR).

A formal process with clear documentation is essential.

Reputational damage and investor concern

Poorly handled removals can raise alarm bells for:

• Customers
• Partners
• Staff
• Investors

To minimise fallout, document:

• Financial mismanagement or breaches of fiduciary duty.
• Internal complaints or whistleblowing.
• Shareholder concerns.
• Correspondence between the director and board.

Taking early legal advice and keeping a full paper trail will protect the company’s legal position and public image.

FAQs

Getting Legal Help

To find out more about how our Company Law Solicitors can help you with removing a director or any other company law matter, please call us on +44 (0) 203972 8469 or email us at mail@eldwicklaw.com.

Note: This article does not constitute legal advice. For further information, please contact our London office.