Termination of Office

Status of Director

Under the default Companies Act provisions and standard articles, a director may resign by notice in writing to the company.The question of what constitutes resignation is one of fact. The resignation may also terminate employment or a service contract with the company.

The termination of office may raise separate issues under the terms of the director’s contract with the company if any and under dismissals and other employment protection legislation. A person may be validly removed from office as a director but it may cause the company to be liable for breach of contract or subject to recourse for unfair dismissal.

The questions of whether or not a person stands appointed as a director or whether he has ceased to be a director are determined by ordinary principles of company law and contract law. The appointment or resignation is effected by the members, the board of directors or the director concerned, depending on the circumstances.

Registration as a director in the Companies Registration Office is independent of the legal status of the appointment or the termination of appointment, The obligation to register changes with the CRO is a separate compliance obligation. It does not by itself cause a change in status.

Any assignment of office shall, notwithstanding anything to the contrary contained in the provision, be of no effect unless and until it is approved by a special resolution of the company.


Removal by Board

The company’s constitution may permit a majority of the board of directors to remove a director. A holding company’s directors may be empoweed to remove from office, persons appointed as directors of subsidiaries.

The terms of the power will be governed by the constitution. Fair procedures will usually be required. The State Constitution has been held to apply to a removal from office of a director, as it is a statutory office created by law.

The exercise of the powers will be subject to the ordinary limitation which applies to the exercise of directors’ powers. The power must be exercised in good faith for the benefit of the company.  The removal from office may be valid but may leave the company in breach of contract.


Cessation of Director in Office I

The office of director is deemed vacated if the director

  • fails to meet a share qualification within the relevant time;
  • is adjudicated bankrupt or being a bankrupt has not obtained a certificate of discharge in the relevant jurisdiction; or
  • becomes or is deemed to be subject to a disqualification order.

Save to the extent that the company’s constitution provides otherwise, the office of director is deemed vacated if—

  • the director resigns his or her office by notice in writing to the company; or
  • the health of the director is such that he or she can no longer be reasonably regarded as possessing an adequate decision-making capacity;
  • a declaration of restriction is made in relation to the director and the directors, at any time during the currency of the declaration, resolve that his or her office be vacated;
  • the director is sentenced to a term of imprisonment (whether or not suspended) following his conviction for an indictable offence; or
  • the director is for more than 6 months absent, without the permission of the directors, from meetings of the directors held during that period.

Cessation of Director in Office II

A director’s right to compensation or any other remedy available to the person, for wrongful termination of his appointment as director or of any appointment or position terminating, are not affected by his removal from office under the statutory powers.

Under earlier standards articles, a director was  deemed to resign and be removed from office if

  • he was convicted of an indictable offence unless the directors otherwise agree;
  • was absent from meetings for more than six months without permission, or
  • he became of unsound mind.

Removal of Director from Office

A director may be removed by ordinary resolution of the members. Although the power to remove a director appears absolute, there are exceptions and limits to it.

It is possible for the constitution/ articles to grant shares which carry special voting rights, such as on a resolution to remove the director concerned, which may allow the director or his associates to veto the termination.

The power to remover does not apply to a director for life of a private company.  In a petition for relief from oppression, the court may exceptionally, restrain the removal of a director from office, if not to do so, would constitute oppressive conduct or contravene his legitimate expectations as a member.

Regardless of the termination of office, the director may have a claim for breach of his employment contract or for unfair dismissal. He may be entitled to fair procedures in the removal process.

Exceptionally, it may be possible to obtain an injunction after the issue of a petition for oppression or a claim for breach of contract of fair procedures, to restrain removal of the director.


Statutory Procedure for Removal I

A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its constitution or in any agreement between it and him or her.

In the case of a resolution to remove a director under this provision or to appoint somebody instead of the director so removed, at the meeting at which he or she is removed, the following provisions shall apply

  • the company shall be given not less than 28 days’ notice of the intention to move any such resolution except when the directors of the company have resolved to submit it;
  • on receipt of notice of such an intended resolution, the company shall forthwith send a copy of it to the director concerned, and the director (whether or not he or she is a member of the company) shall be entitled to be heard on the resolution at the meeting; and
  • the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting. If this is not practicable, the company shall give them notice, either by advertisement in a daily newspaper circulating in the district in which the registered office is situated or in other manner allowed by the Act or by the constitution, not less than 21 days before the date of the meeting.

Any such resolution that is passed that does not comply with the above provisions is void. However, if after notice of the intention to move such a resolution has been given to the company, a meeting is called for a date 28 days or less after the notice has been given, the notice, though not given within the time required shall be deemed to have been properly given.


Statutory Procedure for Removal II

Where notice is given of an intended resolution to remove a director and the director concerned makes representations in writing to the company (not exceeding a reasonable length) and requests their notification to the members, the company shall, unless the representations are received by it too late for it to do so;

  • in any notice of the resolution given to members of the company, state the fact of the representations having been made; and
  • send a copy of the representations to every member of the company to whom notice of the meeting is sent (whether before or after receipt of the representations by the company).

If a copy of the representations is not sent (either because they were received too late or because of the company’s default) the director concerned may, without prejudice to his right to be heard orally, require that the representations be read out at the meeting concerned.


Statutory Procedure for Removal III

Copies of the representations need not be sent out and the representations need not be read out at the meeting if, on the application either of the company or of any other person aggrieved, the court is satisfied that the rights are being abused to secure needless publicity for defamatory matter and orders that those things need not be done.

The court may order the company’s costs on such an application to be paid in whole or in part by the director concerned, notwithstanding that he or she is not a party to the application.

A vacancy created by the removal of a director under this provision may be filled at the meeting at which he or she is removed. If not so filled, it may be filled as a casual vacancy.

A person appointed director in place of a person removed under the provision is treated, for the purpose of determining the time at which he or any other director is to retire (if applicable), as if he he had become director on the day on which the person in whose place he or she is appointed was last appointed director.


Notice to CRO I

A company must within the period of 14 days after the date of the happening of

  • any change in its directors or in its secretary or assistant or deputy secretary; or
  • any change in any of the particulars contained in the register,

send to the CRO a notification in the prescribed form of the change and of the date on which it occurred. There is a prescribed form; the B10.

Where a company fails to send a notification in the prescribed form to the CRO of the fact of a person’s having ceased, for whatever reason, to be a director or secretary of the company and of the date on which that event occurred, the former director or secretary may serve on the company a notice requesting it to send forthwith, the notification of the matters in the prescribed form, to the CRO.


Notice to CRO II

The notice is to state that if the company fails to comply with that request within 21 days after the date of service of the notice on it, he will forward to the CRO and to every person who, to his or her knowledge, is an officer of the company, a copy of any notice of resignation by him or her as a director or secretary of the company or any other documentary proof of his or her having ceased to be such a director or secretary.

He must send the above and also send

  • in the case of the CRO, such additional information as may be prescribed (which may include a declaration made by the person stating the names of the persons who, to the knowledge of the person, are officers of the company);
  • in the case of every other person forwarded as mentioned above, a written request of the person that he or she take such steps as will ensure that the failure of the company to comply with the notice continues no further.

If the company fails to comply with a request made of it under the notice, the former director or secretary may forward to the CRO and to every person who, to his or her knowledge, is an officer of the company, a copy of the notice of resignation or other documentary proof above, if, but only if, there is forwarded together with that notice or proof in the case of the CRO, the additional information referred to above.

No notice of resignation or other documentary proof of a person having ceased to be a director or secretary of a company which is forwarded to the CRO by that person (other than such a notice or other proof which is forwarded by him) shall be sent to the CRO. No additional information that is included in a notice of resignation or other documentary proof and forwarded to the CRO shall, of itself, be regarded as constituting defamatory matter.


References and Sources

Primary References

 

Companies Act 2014 (Irish Statute Book)

Companies Act 2014: An Annotation (2015) Conroy

Law of Companies 4th Ed.  (2016)  Ch.13   Courtney

Keane on Company Law 5th Ed. (2016) Ch.27] Hutchinson

Other Irish Sources

Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury

Introduction to Irish Company Law    4th Ed. (2015) Callanan

Bloomsbury’s Guide to the Companies Act 2015      Courtney & Ors

Company Law in Ireland 2nd Ed. (2015) Thuillier

Pre-2014 Legislation Editions

Modern Irish Company Law   2nd Ed. (2001) Ellis

Cases & Materials Company Law 2nd Ed. (1998) Forde

Company Law 4th Ed. (2008)  Forde & Kennedy

Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy

Companies Acts 1963-2012   (2012)  MacCann & Courtney

Constitutional Rights of Companies   (2007)  O’Neill

Court Applications Under the Companies Act (2013) Samad

Shorter Guides

Company Law – Nutshell 3rd Ed. (2013) McConville

Questions & Answers on Company Law (2008)        McGrath, N & Murphy

Make That Grade Irish Company Law 5th Ed. (2015) Murphy

Company Law BELR Series (2015)   O’Mahony

UK Sources

Companies Act 2006 (UK) (Legilsation.gov.uk)

Statute books Blackstone’s statutes on company law (OUP)

Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington

Company Law in Context 2nd Ed. (2012) D Kershaw

Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam

Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington

 

UK Practitioners Services

Tolley’s Company Law Handbook

Palmer’s Company Law