required to declare his interest if he had been a director
or it may be a general one (s 317(8)(a) and (b)).
In Re Neptune (Vehicle Washing Equipment) Ltd
(1995) the High Court held that even a sole director
must declare and record his interest in a contract with the
company at a board meeting. The sole director concerned
had resolved to pay himself £100,000 as severance pay
on the termination of his employment and the share-
holders caused the company to sue to recover it on the
grounds that he had not disclosed his interest in the con-
tract at a board meeting under what is now the CA 2006,
s 182. Therefore, the company claimed the contract could
be avoided. In deciding preliminary matters prior to the
trial, it was decided that he should have made disclosure
at a board meeting, even though he was a sole director.
The court said he could have a meeting on his own, or
perhaps with the company secretary present, so that the
declaration could be made and recorded in the minutes.
However, the declaration need not be made aloud: the
director could silently declare it while thinking about
any conflicts of interest there might be. Obviously, to
record it in the minutes is the important point.
Removal under statute
Under the provisions of s 168 every company has power
to remove any director before the end of his period of
office.
The provisions are, for practical purposes, the same as
those they replace.
The removal is carried out by an ordinary resolution
of the members in general meeting. A written resolution
cannot be used. Special notice of 28 days must be given
to the company secretary that the resolution will be
moved. The meeting at which the removal of a director
under s 168 is to be considered must be called by at least
21 days’ notice.
The director is entitled to have a written statement
in his defence, as it were, sent with the notice of the
meeting. That failing, he can make an oral statement at
the meeting.
As we have seen, the removal of a director does not
affect any right he may have to claim money compensa-
tion for the dismissal.
Removal under the articles
The power to remove directors under s 168 is a some-
what drawn out procedure and company directors may
wish to exercise the power of director removal themselves.
A power in the articles of the company can achieve this,
as in the case of a clause in the articles allowing a simple
majority of the board to remove a director by written
notice in writing. The director removed would not have
the statutory right to make representations though he or
she may, depending on the circumstances, have a claim
against the company for wrongful dismissal.
The fact that the articles contain such a provision will
not prevent members with a sufficient majority from
using the s 168 route as where they have lost confidence
in a director and the board remain inactive. Section 168
states that it applies even when other methods of removal
also apply (s 168(5), (6)).
A quite common use of a removal power in the articles
is a removal clause in the articles of a subsidiary com-
pany allowing the holding company to remove directors
of the subsidiary, something that cannot be achieved
under s 168.Retirement
The company’s articles generally provide that a certain
number of directors shall retire annually. This is called
retirement by rotation. Articles may provide for one-third
to retire annually. Those retiring are usually eligible for
re-election.Resignation
The articles usually provide that a director vacates office
when he notifies his resignation to the company.Disqualification
The grounds for disqualification of directors may be set
out in the articles.
In addition, the court may disqualify directors. For
example, under s 3 of the Company Directors Disqualifi-
cation Act 1986 (which is not repealed by the CA 2006
and continues ‘stand alone’ and unchanged), the court
can disqualify a director following persistent default in
filing returns, accounts and other documents with the
Registrar. Persistent default is conclusively proved by the
fact that the director has had three convictions in a period
of five years for this kind of offence. The maximum period
of disqualification in this case is five years.
Another ground for disqualification, which is increas-
ingly coming before the courts, is to be found in s 10 ofPart 2Business organisations