Leadership

How To Add Or Remove A Director To A Company

Luisa Ddakis | 26 August 2022 | 2 years ago

adding director to company

Things aren’t always straightforward in business. Whether your company is changing hands or there’s been a change in strategic direction, there will be times when management changes and you need to add or remove a director from your company.

Luckily, the process of adding director to company and removing a company director is relatively straightforward. In this article, we’ll talk you through the process of adding or removing a director from your company, as well as answering some of the most commonly asked questions about changing director details in a limited company.

Adding Director To Company – How To Do It

A limited company must always have at least one director. This means that if the director resigns, a new director will need to be appointed for the company to continue to operate.

You might also decide to add a new director to your company to bring new skills into the organisation, or if you choose to go into business with another person.

Whatever the reason for adding a new director to your company, you’ll be pleased to learn that the process of appointing a new director is relatively straightforward. Let’s take a look at the steps you’ll need to follow to appoint a new director to your company.

1.     Ensure That The New Director Is Eligible

To be eligible to be a director of a company in the UK, there are a few criteria that the individual will need to meet. Company directors must be:

  • Aged 16 or over
  • Not disqualified from being a director
  • Not undischarged bankrupt
  • Is not auditing the company
You’ll also need to ensure that the potential director meets any conditions that are set out in the company’s articles of association.

2.     Seek Approval Of The Appointment

There are two ways in which a company director can be approved for appointment: by the board of directors or by the shareholders.

Most companies will be able to appoint a new director by holding a vote at a board meeting. If a majority of existing directors approve the appointment of the new director, the appointment can go ahead.

Alternatively, the articles of association may state that a shareholder vote needs to be held to appoint the new director. A majority vote will need to be received for the new director to be appointed.

3.     Sign A Letter Of Consent

Before a new director can be appointed, the new director will need to sign a letter of consent which confirms that they want to become a director of the company. This is a requirement under the Small Business, Enterprise and Employment Act 2015.

4.     Inform Companies House

After the new director has been appointed into their position, the company has a duty to inform Companies House within 14 days. This should be done by completing form AP01 – Appointment Of Director.

Within this form, you will need to provide the following details:

  • The name of the limited company
  • The Company Registration Number (CRN)
  • The date that the new company director was appointed
  • The full name of the new director, including their title and any previous names
  • The date of birth of the new director
  • The residential address of the new director
  • The service address of the new director
  • The nationality of the new director
  • The occupation of the new director

Is It Easy To Add A Director To A Company?

The process of adding a new director to your company is relatively straightforward. You’ll need to ensure that the potential director is eligible to be the director of a limited company in the UK, and then gain approval from either the existing directors of the company or its shareholders. Once this has been done, the new director will need to sign a letter of consent, confirming that they agree to the appointment.

Once the new director has been appointed, you will need to inform Companies House of the appointment within 14 days using form AP01.

Whilst there are several steps involved with appointing a new company director, the process is reasonably simple to follow, making it easy to add a new director to your company.

What Does Director’s Occupation Mean?

When you complete form AP01 to appoint a new director to your company, you will be asked to provide their occupation. This is a question that leaves many people feeling confused – surely their occupation is simply the director of the company?

Company directors do not need to hold any formal qualifications as a prerequisite to being appointed in their position. However, most directors will have an occupation that has led to them gaining their position. For example, the director may also be a lawyer, accountant or an IT specialist. If this is the case, this is the profession that you should list under ‘occupation’.

Alternatively, the occupation of the director can be listed simply as ‘director’, or the section can be left blank if desired.

removing a company director

Removing A Company Director – How To Do It

There are many reasons why a director may need to be removed from a limited company. These can range from the resignation of a director, the sale of the company or a difference of opinion within the board of directors.

Whatever the reason for the removal, it must meet the terms set out in the Companies Act 2006, as well as within the articles of association of the company.

It’s also important to remember that every company needs at least one director. So, if the sole director wants to leave the company, a new director will first need to be appointed to the company before this can happen.

There are four ways in which a company director can be removed. These are:

  • Voluntary resignation
  • Removal under the articles of association
  • Removal by ordinary resolution of members
  • Removal by the Court
Let’s take a look at each of these methods in more detail.

1.     Voluntary Resignation

If a company director decides to resign to retire, to pursue other opportunities, or as a result of a difference of opinion, this is known as voluntary resignation.

The director will first need to write a letter of resignation to the directors and shareholders of the company. This letter should state the intention to resign, as well as the date from which this resignation will be effective.

Once the director has sent their letter of resignation, Companies House will need to be informed of the resignation. This can be done online, or by completing form TM01. This must be done within 14 days of the resignation.

2.     Removal Under The Articles Of Association

There are some circumstances in which the articles of association of the company require a director to be removed from the company immediately. In the case of the modal articles of association, these circumstances are:

  • UK legislation such as the Companies Act 2006 prohibits a director from remaining in their position.
  • The director is made bankrupt through a bankruptcy order
  • A doctor or other registered medical practitioner deems the director unfit to remain in office
If a director needs to be removed from the company under the articles of association, this is done in a similar way to a voluntary resignation. However, the letter of resignation is not required. You simply notify Companies House online or by completing form TM01 to make them aware of the removal of the director.

3.     Removal By Ordinary Resolution Of Members

There are some situations in which a director needs to be removed from a company but the reason is not covered under the articles of association and they do not want to resign voluntarily. In this case, the director can be removed if a resolution is passed using section 168 of the Companies Act 2006.

As long as the reason for removing the director does not contravene any contractual agreement or legislation, shareholders of the company are able to pass an ordinary resolution to remove the director from office. This requires a simple majority of over 50%.

This process is often used when shareholders are not satisfied with the performance of the director in question.

Before the vote is taken, the director must be given ‘special notice’ of at least 28 days, informing them that a board meeting has been scheduled and that a vote is planned to decide their future. They must then be allowed to attend the meeting and put forward any representations that they wish to make before the vote can take place.

If the board votes to remove the director from office, the company will then need to file form TM01 with Companies House within 14 days, informing them of the removal of the director.

4.     Removal By The Court

There may be instances where a company director is deemed to be unfit, for example if they are failing to maintain their legal responsibilities. In this case, a complaint may be made by a member of the public or a member of the company to the Insolvency Service.

In the case of a company director failing to meet their statutory obligations, they can also be disqualified by HMRC, Companies House, the Court, the Competition and Markets Authority (CMA) or the Financial Conduct Authority (FCA).

For a director to be deemed to be unfit, they will need to fall into one of the following categories:

  • They have failed to keep accurate accounting records
  • They have failed to prepare and file annual accounts or confirmation statements
  • They have failed to pay tax to HMRC
  • They have continued to trade when the company is insolvent (cannot pay its creditors or bills)
  • They have failed to cooperate with an Official Receiver or an insolvency practitioner

Do You Need A Reason To Remove A Director?

If a director decides to voluntarily resign from their position, no reason needs to be given to Companies House for them to be removed from the company. However, if a director does not wish to voluntarily resign, a justifiable reason will be required for them to be removed from office.

Reasons for the removal of a director include:

  • Unsatisfactory performance (this will require a shareholder vote with a majority of over 50%)
  • Legislation means that a director cannot remain in their position
  • The director has become bankrupt
  • The director is deemed unfit to remain in position by a registered medical professional
  • The director has failed to meet its legal or statutory obligations
How To Change Director Details With Companies House

How To Change Director Details With Companies House

There are many situations in which you may need to change the details of a director with Companies House. These include if you have moved house or changed your name as a result of marriage. Fortunately, it is straightforward to change director details with Companies House.

To request director details to be changed, you will need to file form CH01 with Companies House. This form can be used to change any details of the director, except for their date of birth. Once you have submitted the form, it will usually take around 48 hours for Companies House to update the details on the public register.

The date of birth of a director is the only detail that cannot be changed. If you find that you made a mistake when registering a director of the company and the wrong date of birth has been input, you will need to complete a replacement appointment form and file this with Companies House. They will then be able to correct the error.

In Summary

Whilst some companies retain the same directors throughout their lifespan, other companies experience change. Whether it’s a director leaving the company to retire or a new director coming on board to bring new ideas to the company, it’s inevitable that changes may need to be made from time to time.

Fortunately, the process of adding director to company and removing a company director are relatively straightforward. In this article, we’ve talked you through the process of adding and removing directors from your company. We hope that this has answered your questions and you now feel confident making changes to your company.

Topic

Leadership

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