What is a director of a company?

A company director is an individual or legal entity (eg another company) that manages a company's daily operations and can be held liable for the company’s actions. Every private limited company must have at least one director, and that person must be a natural person (meaning a human, not another company).

Under the Companies Act 2006, a director must:

• be at least 16 years old

• not be currently disqualified from acting as a director

• not be an undischarged bankrupt (unless they have court permission)

If you want to know more about the duties and different types of people that can hold this office, read Company roles and appointments, The role of a company director, and Different types of company directors.

How do you appoint a director?

Appointing a new director is straightforward, but you must ensure you follow the correct procedure detailed in the Companies Act 2006 and your company's Articles of association.

Who can appoint a director?

Depending on your company’s articles, directors are usually appointed in one of two ways:

• by the existing board of directors 

• by the company’s shareholders (by passing an ordinary resolution at a general meeting)

If your company uses the standard model articles, directors can be appointed either by an ordinary resolution of the shareholders or by a decision of the existing directors. The board often uses its power to fill a vacancy or add expertise, but it is always essential to check the articles of association first for any specific restrictions on this power (eg by requiring the shareholders to confirm the appointment at a general meeting). 

Making the appointment official

The appointment process begins with two crucial internal steps. 

The person being appointed must first give their formal consent to act as a director, which should always be done in writing. Use our bespoke drafting service to make sure a director's consent to act document.

The board or the shareholders must then pass the necessary resolution to approve the appointment (either at a board meeting, a general meeting, or in writing). If the shareholders are making the appointment, you can make a Shareholders' resolution to formally record the decision. 

You'll also need a contract to govern the director's relationship with the company:

• for an executive director, you should make a service agreement, such as a Senior employment contract or custom director services agreement, which covers their employment status and their office as a director

• for a non-executive director (NED), you should make a Letter of appointment (LOA) to set out the terms of the role

While the board generally determines these terms, the law and the company's articles will always override any conflicting terms in the contract. 

Remember that you must accurately record this decision in Board minutes or a resolution, as this confirms the date the appointment becomes legally effective.

How do you remove a director?

The director removal process is mandatory when the shareholders want to force a director out of office. This is governed strictly by the Companies Act 2006.

There are several ways for a directorship to end involuntarily (ie not due to the director’s choice to stop acting as director). These include:

• removal by shareholders - the owners of the company decide to terminate the directorship

• disqualification - the director is banned from acting as a director

• incapacity - the director is deemed unable to perform the role

• death

What is the statutory procedure for removal?

A company’s shareholders can always remove a director by following a formal process set by law. This generally involves the shareholders passing an ordinary resolution agreeing to the removal of the director. However, it's essential to review your company's articles and the director’s contract first, as they may provide a simpler method for removing the director without requiring a full shareholder resolution.

Note that the right to remove a director cannot be taken away by a director’s contract or the articles, although the director may still be able to claim damages for breach of contract.

To formally remove a director in accordance with the law:

• a shareholder must send the company written notice of the proposed resolution at least 28 clear days (ie the 28 days don't include the day the notice is given or the day of the meeting) before the general meeting where the vote will happen

• the company must immediately send a copy of this notice to the director concerned

• the director has the right to make written comments that must be circulated to all shareholders (or read out at the meeting if received too late)

• the company must call a general meeting, as the resolution to remove the director cannot be passed using a written resolution 

• during the meeting, an ordinary resolution is needed to pass the resolution and remove the director

• the director has the right to attend and speak on the resolution, even if they aren't a shareholder

If the director being removed is an executive director, they might have additional legal rights in their capacity as an employee, such as claiming unfair dismissal or discrimination. Even if the company is legally removed, it remains liable for any compensation or damages due under the director's contract. Furthermore, if a company agrees to pay a director in connection with their removal from office, that payment might require separate shareholder approval.

As removing directors from the office can be tricky, do not hesitate to Ask a lawyer for help.

Disqualification

A director must automatically stop holding office if they're disqualified by a court, under a disqualification undertaking, or if they are subject to a bankruptcy order. If a director's actions are deemed unfit (eg due to serious financial or corporate misconduct), they can be banned from being involved in the management of any company for up to 15 years. For more detailed information, read Disqualification of company directors.

Incapacity

A directorship will automatically end if the director is deemed incapable of performing their duties due to severe mental or physical illness. A company’s articles of association will often set out the exact procedure, such as requiring certification by a registered medical practitioner.

Death

A directorship ends immediately when the director dies. This is because the role of director is personal and cannot be automatically transferred to another person.

How do directors voluntarily leave a company?

Directors can stop holding office voluntarily through resignation or retirement.

Resignation

Resignation is the simplest way for a director to leave the company. Neither the Companies Act 2006 nor the standard model articles require a detailed resignation procedure. Usually, a director resigns by sending a resignation letter to the other directors. For more information, read How to resign as a company director.

General retirement

Retirement rules typically cover the end of a director's professional life, based on age or personal preference. The law doesn't impose a mandatory retirement age for company directors. If the director is also an employee, their right to retire is governed by general employment law principles. For more information, read Retirement.

Retirement by rotation

A company’s articles may require directors to retire by rotation. This means that a portion of the directors must resign from office at each of the company’s annual general meetings and can only continue in office if re-appointed by shareholders.

This requirement is more common in public companies (PLCs) than in private limited companies (LTDs). To learn more about the distinctions between the two, read What are the differences between PLCs and LTDs?

Statutory filing and notification requirements

This is the final step after making any changes to the company directors. Whenever a director is appointed or leaves office, you must make sure you complete all the legal paperwork required by law. If you don't file the correct statutory forms with Companies House within the deadline, you risk committing a criminal offence and being subject to fines.

Notification requirements for director appointments

When a new director takes office, the company must notify Companies House within 14 days of the appointment taking effect. This duty applies whether the director was appointed by the board or by the shareholders. You must file the relevant form for an appointment with Companies House.

Notification requirements for director removals or resignations

When a director leaves office, whether by statutory removal, resignation, incapacity, or death, the company must notify Companies House within 14 days of the change taking effect. You must file the relevant form for termination with Companies House.

Internal company records

Statutory filing is just one part of your duty. You must also maintain accurate internal records of every appointment and removal decision. This includes making sure the company's minutes and resolutions correctly record the date the director was appointed or left office. For more information on how to keep your statutory records and minutes, read Company books and records.

Use a Shareholder resolution to appoint or remove a director. If you need to formalise an appointment, you can make a Senior employment contract or a Non-executive director letter of appointment. If you require any custom document, consider using our Bespoke drafting service. 

Remember that you can always Ask a lawyer if you have any questions or concerns about appointing and removing directors.