There may come a time when you need to remove a director from your company, for example because of misconduct, persistent performance concerns, a breakdown in relationships or a change in the company’s leadership requirements.
These situations can be tense and may affect business continuity, employees, shareholders and investor confidence. It is important to choose the right route and coordinate the process carefully to minimise the risk of future legal disputes.
Our corporate lawyers advise companies and directors on the options available and the wider consequences of a director’s departure. In this guide, we explain the main ways in which a director of a private company may leave office and the issues that should be considered before action is taken.
Contents:
- What should you consider before starting the removal process?
- Removing a director under the company’s articles of association
- Removing a director by voluntary resignation
- Removing a director by ordinary resolution
- Removing a director who is also an employee
- Does removing a director expose the company to a legal claim?
- When can a director’s appointment end automatically?
- Removal by a court or operation of law
- What happens if a sole director resigns or is removed?
- What information should you gather before seeking advice?
- Updating company records and Companies House
- Implications for shares and existing share schemes
- Managing communications and business continuity
- Legal support with removing a company director
What should you consider before starting the removal process?
Start by identifying every capacity in which the individual is connected with the business. A director may also be an employee, shareholder, option holder, founder, guarantor or authorised signatory, and each role may need separate action.
You should also confirm the board and shareholder voting position, review the relevant agreements, preserve evidence relating to any alleged conduct and consider whether the company can continue to make valid decisions following the departure.
Where the exit is contentious, high-value or time-sensitive, early advice can help the company coordinate the legal steps, negotiations and stakeholder communications while avoiding inconsistent decisions.
Removing a director under the company’s articles of association
The first document to consult is the company’s articles of association. The articles may determine whether the appointment ends automatically in particular circumstances and what governance steps are required. Find out more about articles of association in our handy legal guide.
A company incorporated with unamended model articles will usually be governed by the standard provisions prescribed for its company type. However, older companies may have different default articles, and even companies that began with the model articles may have amended them later. Always obtain the company’s current registered articles rather than assuming which version applies.
Under article 18 of the model articles for a private company limited by shares, a person stops being a director in specified circumstances. These include where:
- their resignation takes effect
- they cease to be a director under the Companies Act 2006 or are prohibited by law from acting
- a bankruptcy order is made against them
- they make a composition with their creditors generally in satisfaction of their debts
- one of the specified incapacity events in article 18 occurs.
Separately, shareholders may remove a director by ordinary resolution under the Companies Act 2006.
Bespoke articles may contain additional provisions dealing with the termination of a director’s appointment, including where their service agreement ends or specified misconduct occurs.
The articles should be considered alongside any shareholders’ agreement and service agreement. Those documents may contain more detailed terms concerning the director’s appointment, employment, shares, voting rights and the consequences of departure.
Early advice is particularly important where the director is also an employee or shareholder, the board or shareholder position is divided, misconduct is alleged, or the departure could affect funding, customers or the wider workforce.
Removing a director by voluntary resignation
Provided the company’s articles do not state otherwise, a director can voluntarily resign by notifying the company that they are leaving office.
The resignation must comply with any requirements in the articles, service agreement and shareholders’ agreement to ensure that it is valid and takes effect at the intended time.
In a sensitive situation, a voluntary resignation may form part of a negotiated exit. The parties may also need to agree the termination of employment, compensation, confidentiality, announcements, share transfers, option treatment and the return of company property.
Removing a director by ordinary resolution
Shareholders may remove a director before the end of their term by passing an ordinary resolution at a meeting. This generally requires a simple majority of the eligible shareholder votes cast.
The statutory right applies despite anything to the contrary in an agreement between the company and the director. However, exercising that right does not remove any contractual, employment or shareholder consequences of the decision.
Special notice is required for a resolution to remove the director. The resolution must be considered at a shareholder meeting and cannot be passed as a written resolution (at least 28 clear days’ notice before the meeting).
The timing requirements should be considered at an early stage, particularly where the company is seeking to make a prompt leadership change. The meeting must be organised in accordance with the articles and applicable statutory requirements. Where remote or hybrid participation is proposed, the company should confirm that the arrangements are valid before notices are issued.
The affected director must receive notice and has a right to be heard at the meeting. They may also make written representations and request that those representations are communicated to shareholders, subject to the applicable requirements.
Following the correct process is important. A defect in the notices, meeting arrangements or treatment of the director’s representations may give rise to a challenge and make an already difficult situation more contentious.
A replacement director may be appointed at the meeting, subject to the necessary notice and approval requirements. The company should confirm in advance that the board will remain able to make valid decisions and that the departing director’s operational responsibilities and authorities will be reassigned.
Removing a person from office does not, by itself, resolve their employment, contractual or shareholder rights. The company may still face claims for compensation or damages, depending on the circumstances and the relevant agreements.
A settlement agreement may be appropriate where the parties wish to resolve employment or contractual claims and agree the practical terms of the departure.
Removing a director who is also an employee
Directorship and employment are legally distinct positions. Unless the articles or another agreement provide otherwise, terminating the individual’s employment will not necessarily remove them as a director. Equally, removing them from office will not automatically terminate their employment.
The company should therefore review the service or employment agreement, articles and shareholders’ agreement before taking either step. The appropriate employment process will depend on the genuine reason for the proposed dismissal. Potentially fair reasons include conduct, capability, redundancy, illegality and some other substantial reason. A fair reason alone is not enough: the company must also follow a fair process and should take the Acas Code of Practice into account where it applies.
The company should also consider remuneration, notice, benefits, pensions, tax, restrictive covenants and possible employment claims. Where misconduct is alleged, the company should avoid prejudging the outcome and should ensure that any investigation and decision-making process is appropriate.
Coordinating the corporate and employment workstreams can help avoid a situation in which the individual has been removed from one role but continues to retain rights or authority through another.
Does removing a director expose the company to a legal claim?
It can. Removing someone from the office of director does not automatically terminate their employment, cancel their shares or options, or remove rights under a service agreement or shareholders’ agreement.
Depending on the circumstances, potential issues may include breach of contract, unfair or wrongful dismissal, discrimination, unpaid remuneration, shareholder disputes or disagreement over leaver status. Allegations of misconduct should also be handled carefully and supported by an appropriate investigation.
Before starting the formal removal process, the company should assess these overlapping rights and decide whether a negotiated exit or settlement is likely to produce a faster and more controlled outcome.
When can a director’s appointment end automatically?
In addition to resignation or removal by shareholders, a director’s appointment may end automatically in circumstances specified by law, the company’s articles or the terms of their appointment.
Depending on the governing documents, these may include:
- death
- the expiry of a fixed term that expressly applies to the directorship
- bankruptcy or another insolvency event specified in the articles
- becoming prohibited by law from acting as a director
- an incapacity event covered by the articles
- another valid termination trigger in bespoke articles.
The end of a service agreement or employment contract will not necessarily end the directorship unless the articles or appointment terms clearly produce that result.
The precise effect will depend on the company’s articles and the individual’s agreements. The company should also check whether a replacement must be appointed to preserve the required number of directors or maintain effective decision-making.
Removal by a court or operation of law
A person may cease to be eligible to act as a director because of a court order or a provision of law. This may arise, for example, through director-disqualification or insolvency-related rules.
Court proceedings may also arise in a wider shareholder dispute, including where it is alleged that the company’s affairs have been conducted in a way that is unfairly prejudicial to one or more shareholders.
These situations are distinct from a company choosing to remove a director by shareholder resolution. Specialist advice should be obtained where court proceedings, disqualification, insolvency or allegations of breach of duty are involved.
What happens if a sole director resigns or is removed?
A private company must have at least one director who is a natural person. The resignation or removal of a sole director therefore requires careful planning.
A replacement may need to be appointed before or at the same time as the existing director leaves office. The company should review its articles to determine who has authority to make the appointment and how decisions can validly be taken.
The same issue can arise in a company with several directors if the departure would leave the board without the quorum required to act. This should be checked before the removal process begins.
A former director may also remain subject to continuing obligations, including certain duties relating to conflicts of interest, benefits received from third parties and confidential information obtained while in office.
What information should you gather before seeking advice?
It is helpful to gather:
- the articles of association
- any shareholders’ agreement
- the director’s service or employment agreement
- relevant share-option or incentive documents
- recent board and shareholder records
- an up-to-date summary of the shareholder voting position
- documents relating to any alleged conduct or performance concerns
- details of the director’s current responsibilities, authorities and access rights.
Early access to these documents can help identify inconsistent provisions, establish the available options and avoid steps being taken in the wrong order.
Updating company records and Companies House
Once a director has left office, the company must update its statutory records and notify Companies House within the applicable time limit.
The company should also review and, where appropriate, update:
- bank and payment authorities
- delegated signing powers
- access to systems and confidential information
- insurance notifications
- regulatory or contractual records
- website and public-facing information
- internal approval processes.
Companies House identity-verification requirements came into force on 18 November 2025 under the Economic Crime and Transparency Act. New directors must verify their identity before their appointment can be registered. Existing directors must verify their identity (and provide their personal code) when filing the Company’s next confirmation statement. A replacement director’s verification position should therefore be confirmed before filing their appointment. Identity verification is not, by itself, what brings the outgoing director’s appointment to an end.
From 18 November 2025, companies are generally no longer required to maintain internal statutory registers of directors, directors’ residential addresses, secretaries or persons with significant control (PSCs). These details are instead held centrally at Companies House. Companies should continue to maintain an up-to-date register of members.
Administrative updates should follow, rather than replace, a valid underlying resignation or removal process.
Implications for shares and existing share schemes
Many directors also hold shares, options or other incentives. Their treatment will depend on the terms of the relevant shareholders’ agreement, articles and scheme rules.
Leaver provisions commonly distinguish between different reasons for departure. Whether a director is treated as a good or bad leaver may affect the price paid for their shares, whether options lapse or vest, and whether any existing benefits can be recovered.
A contentious departure should not automatically be assumed to make someone a bad leaver. The company must apply the wording of the relevant documents and follow any decision-making process they require.
The share and option position should be assessed alongside any settlement negotiations. Particular care may be needed where the company expects a funding round, sale or other transaction, as unresolved ownership issues can concern investors or buyers.
Learn more about leaver provisions and the difference between good and bad leavers in our helpful guide.
Managing communications and business continuity
The company should plan who will assume the departing director’s responsibilities and how the change will be communicated to employees, customers, investors and other stakeholders.
Communications should be accurate, proportionate and shared only with those who need the information. Where allegations are disputed or a disciplinary process has taken place, the company should protect the individual’s confidentiality and avoid presenting unproven allegations as fact. The company should avoid statements that could prejudice an investigation, breach confidentiality obligations or unnecessarily damage the parties’ reputations.
A clear handover plan can also reduce disruption to customer relationships, projects, financial approvals and board decision-making.
Legal support with removing a company director
A director’s removal is rarely limited to a single company-law step. It may involve corporate governance, employment rights, shareholder arrangements, settlement negotiations, incentives, tax and potential disputes.
Our corporate, employment, disputes and incentives lawyers work together to:
- identify the safest route and likely commercial consequences
- review the articles, shareholders’ agreement and service contract together
- coordinate the corporate and employment timetables
- negotiate settlement terms and deal with shares or options
- protect decision-making, stakeholder relationships and business continuity
- complete the required resolutions, records and Companies House filings.
We advise companies considering the removal of a director, directors seeking the departure of a co-director and individuals facing a proposed removal. Early advice can help establish a controlled strategy before positions harden or formal steps are taken.
This guide provides general information only and is not a substitute for advice on your particular circumstances.
