Removing a director from a board???

Removing a director from a board???

Author
Discussion

Mark300zx

Original Poster:

1,159 posts

208 months

Friday 3rd July
quotequote all
I am a director on a board set up to help manage a private residential estate and all was well up to now, there is an elderly director who is acting very bizarrely and I think it is the start of a type of dementia. She has upset several of the residents and the other directors voted her off the board, but the managing agents have informed us she can only be voted off by 75% of the residents, any advice?

Stay in Bed Instead

20,167 posts

113 months

Friday 3rd July
quotequote all
What does the Memorandum and Articles of Association state?

I'm guessing each property has one share in the Ltd, and the agreement of 75% of the shareholders is required.

Mark300zx

Original Poster:

1,159 posts

208 months

Friday 3rd July
quotequote all
Stay in Bed Instead said:
What does the Memorandum and Articles of Association state?

I'm guessing each property has one share in the Ltd, and the agreement of 75% of the shareholders is required.
Trying to get a copy of the above, but from what you are saying this sounds correct!

Stay in Bed Instead

20,167 posts

113 months

Friday 3rd July
quotequote all
Mark300zx said:
Trying to get a copy of the above, but from what you are saying this sounds correct!
It might be available on Companies House website.

Mark300zx

Original Poster:

1,159 posts

208 months

Saturday 4th July
quotequote all
Stay in Bed Instead said:
It might be available on Companies House website.
Thanks, it looks like you are correct, do you have any knowledge of any workarounds for this?

RonaldMcDonaldAteMyCat

7,226 posts

51 months

Wednesday 8th July
quotequote all
I'd be careful removing a shareholder (assuming they are) from the board if that person is likely to take severe umbrage at it. They could create plenty of upset, maybe more than they create by being on it.

If the rules for a property managament company are like any other commercial ltd, depending on the % of voting rights they hold, they could create lots of hassle (demanding the accounts are audited, for example).

Assuming you can always muster a well populated quorum, just ensure they're always able to be outvoted.

Mark300zx

Original Poster:

1,159 posts

208 months

Wednesday 8th July
quotequote all
Thanks for the replies, a potential solution has been proposed and that is setting up sub-committees to remove that person from the scenario and involving her in just one or two meetings a year?

Europa1

10,517 posts

144 months

Wednesday 8th July
quotequote all
OP, how many properties are there?

Mark300zx

Original Poster:

1,159 posts

208 months

Wednesday 8th July
quotequote all
43

darreni

2,643 posts

226 months

Wednesday 8th July
quotequote all
Tread carefully, there are protections for minority shareholders.

hyphen

15,843 posts

46 months

Wednesday 8th July
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Are directors appointed for life? If not how long till reelected?

Europa1

10,517 posts

144 months

Wednesday 8th July
quotequote all
Mark300zx said:
43
75% not an easy ask then.

As well as the articles, is there a shareholders' agreement? I ask because I'm pretty sure under the Companies Act you can remove a director with an ordinary resolution, ie 50%, even if the articles state differently (unless the articles give weighted voting rights to directors on any resolution to remove them). The Companies Act process is very technical though, so easy to get wrong and make the removal unsound.

RonaldMcDonaldAteMyCat

7,226 posts

51 months

Wednesday 8th July
quotequote all
Going from memory the companies act would determines the statutory process and the articles/shareholder agreement the power of the board to make the decision.

Beware unfair prejudice if shareholder and director is being removed (especially if the reasons are that they're a bit annoying rather than reasons that strictly relate to the good running of the company).

If it could be implied the true purpose of the committees' formation is to give the effect of removing the director (i.e. all the business usually undertaken by the board is moved to committees), also beware.

If people have lots of spare time, some legal representation and an axe to grind, they can become difficult.

I presume, having voted them off, the director is aware of the feelings of the fellow directors? What did they say about that?

Mark300zx

Original Poster:

1,159 posts

208 months

Wednesday 8th July
quotequote all
This is all happening in the last couple of days, no they don't know they have been voted off and the board may have to ignore that vote and realise that it can't be done!

RonaldMcDonaldAteMyCat

7,226 posts

51 months

Wednesday 8th July
quotequote all
Mark300zx said:
This is all happening in the last couple of days, no they don't know they have been voted off and the board may have to ignore that vote and realise that it can't be done!
Why are the board being asked to vote on something without making one of the directors aware? There are going to be statutory or article driven procedures you must follow to have a binding vote on a matter.

From the outside this is beginning to sound like it's out of order.

Mark300zx

Original Poster:

1,159 posts

208 months

Wednesday 8th July
quotequote all
RonaldMcDonaldAteMyCat said:
Why are the board being asked to vote on something without making one of the directors aware? There are going to be statutory or article driven procedures you must follow to have a binding vote on a matter.

From the outside this is beginning to sound like it's out of order.
Out of order in what context?

RonaldMcDonaldAteMyCat

7,226 posts

51 months

Wednesday 8th July
quotequote all
Mark300zx said:
Out of order in what context?
Some directors appear to have gone behind the back of another director/shareholder and held what appears to be an unlawful board meeting to take an unlawful vote to remove them. Realising their error, these same directors now wish to effect the removal of the shareholder from the board by delegating the board's responsibilities to committees from which that director is specifically excluded.

Have I summarised that correctly?

If so, have the directors considered their actions in light of the rules in the Articles/Shareholder agreements and obligations under the Companies Act? Have they considered the potential liability under unfair prejudice that may arise from the expulsion of the shareholder from the board? Have they considered they may be personally liable?

Yeah, it might all sound a bit overblown for a trumped up residents association, but don't underestimate the irrationality of some people to turn a minor dispute into into an obsession.

Mark300zx

Original Poster:

1,159 posts

208 months

Wednesday 8th July
quotequote all
Fair enough, but the reality is everyone thinks they have lost their mental capacity for logic/reasonable behaviour, how long does a board have to entertain this behaviour, until a Dr diagnoses them?

RonaldMcDonaldAteMyCat

7,226 posts

51 months

Wednesday 8th July
quotequote all
Mark300zx said:
Fair enough, but the reality is everyone thinks that they have lost their mental capacity for logic/reasonable and behaviour, how long does a board have to entertain this behaviour, until a Dr diagnoses them?
I don't want to presume; have any of the residents spoken directly to them about this? Does anyone know any of their friends or relatives they can chat to?

If it really is an issue having them on the board and there are capacity issues, you probably ought to take at least some professional advice. A small amount spent to ensure things are done properly will almost certainly be cheaper than alienating the problem director whilst doing things badly and dealing with the fallout.

Best of luck.

brickwall

3,191 posts

166 months

Wednesday 8th July
quotequote all
You really need to read the articles of association.
There are broadly two ways a director can leave the board
a) They resign. This is the easier and preferable option.
b) They are voted off.
The AofA will specify the conditions/requirements for a director to voted off the board. It could require a vote of other directors, a supermajority of other directors, a majority of shareholders, a super-majority of shareholders, who knows.

You will need to hold and win a valid vote at a valid meeting.

The AofA will specify the conditions under which a vote can be held. For instance
- How long notice must there be before a board meeting? What is quorum for the meeting to be held?
- If you need to hold a General meeting, what are the requirements to call an emergency general meeting? And to hold it?
- Can valid meetings be held ‘virtually’? (Lots or older AofA don’t specify they can, which could lead to trouble)