The Client
A client approached Herrington Carmichael regarding a highly sensitive issue concerning the removal of directors from their private limited company. The directors in question had been found to be acting contrary to the interests of the business. Specifically, they were diverting commercial opportunities to a competing company in which they held interests—thus breaching their fiduciary duties to act in good faith and in the best interest of the company.
The Challenge
The situation was complicated by several factors:
- The conflicted directors retained control of the company’s bank accounts and all key corporate records.
- They were withholding financial and operational information from the rest of the board.
- The company’s registered office address, where official correspondence from Companies House was being sent, was controlled by the conflicted directors.
- The remaining directors, despite being majority shareholders, had no access to critical corporate functions and information.
Given the absence of a voluntary resignation, death, or reason for an automatic termination under the clauses of the Articles of Association, a formal removal process under Section 168 of the Companies Act 2006 was necessary.
Our Approach
We provided the client with comprehensive legal and strategic support, including:
- Legal Analysis:
- Reviewed the Articles of Association for any bespoke provisions that could assist or complicate the process.
- Clarified the process under the Companies Act 2006 for the removal of directors, particularly the procedural requirements for shareholder resolutions.
- Recovery of Control:
- Assisted the unconflicted directors in changing the registered office address with Companies House to secure future communications.
- Aided in retrieving public information and filings directly from Companies House to re-establish oversight.
- Governance and Documentation:
- Prepared the necessary board resolutions, shareholder meeting notices, and minutes for calling and holding the general meeting to pass the ordinary resolution to remove the directors.
- Ensured that statutory notice requirements (minimum 28-day notice for director removal under s.168) were properly followed.
- Execution and Outcome:
- The shareholder resolution was successfully passed.
- The conflicted directors were formally removed.
- The client regained access to the company’s banking and financial systems, enabling the business to resume operations in accordance with its original purpose.
The Outcome
Through our strategic guidance and understanding of the Companies Act 2006, the client was able to:
- Lawfully and effectively remove the conflicted directors.
- Restore transparency and proper governance within the company.
- Reclaim control of the company’s financial and operational infrastructure.
- Mitigate ongoing risk posed by the conflicted directors.
If you’re facing challenges with conflicted directors or governance issues within your company, don’t wait for the damage to escalate.
Contact us today to discuss how we can support you.
