Can Shareholders Remove a Company Director? What the Law Actually Allows

A boardroom relationship has broken down and you’re a majority shareholder wondering whether you can remove a director? 

The short answer is yes. UK law allows shareholders to remove a director. But the reality is that removals are often borne out of disputes, and the process is anything but straightforward and risk-free.

Here you’ll learn how to remove a director, find out about the implications of this including unfair prejudice and employment claims, and why specialist advice is so important before taking formal action.

We act for shareholders, co-founders, and investor directors in private limited companies where there is friction and something has gone wrong, or might be going wrong. If you are looking for advice and assistance with the removal of a director, and to avoid some of the pitfalls associated with this, contact our specialist commercial litigation solicitors. Our commercial litigation team has decades of experience acting in similar situations. We act nationally and are happy to help.

Can Shareholders Remove a Director in the UK? 

As a starting point Section 168 of the Companies Act 2006 enables shareholders to remove a director without their consent using an ordinary resolution at a general meeting. Whether this is appropriate and is the sole determining factor and approach is very fact specific however. In owner managed businesses and/or joint venture companies it is common that Directors are also Shareholders. If there is a shareholders agreement it is possible that whilst section 168 allows removal on a statutory basis, contractually it may have been agreed not to take that approach without unanimity. Equally the articles of association may have been amended and the content must be complied with before taking steps such as relying on statutory rights.

Shareholders must follow the prescribed legal procedures, and a simple majority of over 50% can pass a resolution removing a director.

Before Calling a Meeting, Check These Company Documents First 

Articles of Association

Start by checking the company’s articles of association. The articles act as a company’s rulebook and set out how a director may be removed; this can vary from one company to another depending on if the articles are model or bespoke.

Typically, the articles list different scenarios which trigger the right of removal and events which result in a directorship terminating automatically. In some cases, there’s no need for shareholders to take any action or pass a resolution.

Automatic termination includes situations such as voluntary resignation, bankruptcy, and mental or physical incapacity.

If a director has not fulfilled their legal obligations, has committed fraud, or been convicted of a serious offence, a court can disqualify them from their directorship for a period of up to fifteen years.

Articles of association specifically produced for a company may also contain provisions for director removal in the event of gross misconduct or on termination of the director’s service agreement. 

Articles can often include provisions known as ‘Bushell’ clauses. Such clauses operate in the scenario where the director whose removal is proposed is also a shareholder. The clauses give the director/shareholder ‘weighted’ votes in any shareholder resolution to remove them from office, effectively giving themselves a good chance of being able to block their own removal. To remove Bushell clauses from the Articles, a special resolution (75% of the shareholders) is required, so they are powerful provisions which protect directors/shareholders. 

Employment Contract

Removing a director from the board doesn’t end their employment. If the director holds a service agreement or employment contract, check the notice period, termination clauses, and any restrictive covenants before you act. 

Get the sequencing wrong by, for example, removing them from the board without properly ending the employment relationship, and you risk a claim for unfair or constructive dismissal on top of the boardroom dispute.

Companies Act of 2006 Model Articles

If a business doesn’t have its own articles, the Companies Act 2006 automatically implies model articles for limited companies. These are a standard template so won’t include bespoke provisions for director removal unless they’ve been modified.

Shareholders & Service Agreements 

Check any shareholders’ agreement and service agreements; these may contain more detailed or additional terms surrounding the removal of directors.

It’s essential to take legal advice to review the content of all these documents before taking any action.

How to Remove a Director Under Section 168 of the Companies Act 2006 

Section 168 of the Companies Act allows shareholders to remove a director by passing an ordinary resolution at a general meeting.

The statutory right overrides anything agreed between the director and the company at the start of the directorship, and any attempt to exclude the right in service or shareholders’ agreements or the articles of association.

The shareholders (or the board) proposing the resolution must give 28 days “special notice”  to the company of the intention to remove a director. Once the company has received that special notice, it must notify its shareholders of the resolution in the same manner and at the same time as it gives notice of the general meeting itself, which for a private company is ordinarily the standard 14 clear days.

The director you propose to remove must also receive a copy of the notice. They’re entitled to respond and request that their written representations are passed onto the company’s members or read out at the meeting. They can also make in-person statements at the meeting.

It’s essential to comply with these requirements so the director has no basis to challenge the validity of the removal.

A majority of the eligible voters present at the meeting must pass the resolution; the removal is only valid if passed at a meeting and not via written resolution.

You may need to pay compensation particularly if the director has a service agreement with a fixed term that has not yet concluded. If a director holds other positions in the company, these roles may also require compensation.

Why Removing a Director Can Backfire 

It’s vital to consider the implications of director removal and what this may mean for the company.

Removing a director may seem like a clear-cut solution for difficult situations such as director misconduct or neglect of duties. But the fact a statutory right of removal exists doesn’t anticipate or exclude unfortunate consequences, and some directors won’t go quietly. Consequently, removing a director may solve one problem and create another.

Removal from the board doesn’t deal with shares or automatically terminate an employment contract, both of which must be handled correctly to avoid a claim for unfair prejudice or unfair dismissal.

A company may also still be bound by the actions of a director who has been removed. A former director with a substantial shareholding can block future resolutions and may still be able to influence the company’s operation.

It’s essential to review the company’s articles. Some contain a specific provision that all directors stand for re-election at the next annual general meeting creating something of a revolving door, often catching company members by surprise.

Director Removal and Unfair Prejudice Claims 

A director who is a shareholder can start an unfair prejudice petition if they feel they’ve been mistreated by the majority shareholders or other company directors.

A director will need to satisfy the requirements of unfairness and prejudice laid down in Section 994 of the Companies Act. Those are:

• Unfairness. This typically requires either a breach of the terms on which the shareholder agreed the company’s affairs would be conducted, or parties acting in a way that is contrary to good faith principles. This is particularly relevant in companies that are run as quasi-partnerships (where the shareholders have close relationships, mutual trust and confidence, and expectations of management).

• Prejudice. The conduct must have actually harmed the director’s interests as a shareholder, for example through devalued shares, exclusion from management, or being denied information other members receive.

A court can intervene if the director’s removal combined with other actions disadvantage them as a shareholder. This could include removing a director-shareholder from the board to exclude them from decision-making or using removal strategically to pressurise the director into selling their shareholding.

Evidence in these disputes typically focuses on the reasons for the director’s removal, and the history of the shareholder relationship.

If the court upholds a petition for unfair prejudice, one likely outcome is a share purchase order which requires the majority shareholders to buy the director’s minority shareholding at a fair value allowing them to exit the company.

Alternatives to Removing a Director 

Even if you’re legally on strong ground, removing a director has fallout; it can impact team morale, suppliers, and customers. 

So, are there any alternatives?

A negotiated exit may be expensive but can ultimately avoid many problems and more costly issues further down the line. If there’s a dispute scenario which makes even settlement difficult, mediation may be an option to find some common ground.

If the director is a large or majority shareholder, then their voting weight can block removal, so a voluntary resignation may be the only option anyway.

Most people have a price, so skilled negotiation and a generous settlement package may be the cost of removing a director without a formal process.

Encouraging a voluntary resignation promotes a smooth transition, protecting company operations and reputation. It’s a one-off cost that closes the door to further claims and legal action later on.

When Should Shareholders Seek Legal Advice?

Take advice before taking any action. Removing a director carries hidden pitfalls and commercial consequences that aren’t obvious in the heat of a dispute and the decisions you make early shape how much leverage you have later.

What we review before advising on removal

We review three key documents before advising on the right approach:

• Articles of association to identify whether there’s a route to removal that’s quicker or simpler than the Section 168 statutory process, including automatic termination triggers.
• Shareholders’ agreement to check for additional removal provisions, bad leaver clauses, and share transfer obligations that may apply.
• Director’s employment contract to assess what compensation may be due and what risks arise if the contract is terminated incorrectly.

If you have standard model articles and no shareholders’ agreement, the statutory process under Section 168 is likely your only route and getting the procedure right becomes critical.

If you’re following the statutory route

We’ll ensure strict compliance with the notice requirements and timescales under the Companies Act. A procedural error, such as failing to give proper special notice or denying the director their right to be heard, can invalidate the removal and expose you to challenge.

You must also notify Companies House of the director’s removal within fourteen days. Failure to do so is a criminal offence.

One compliance point worth noting: under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), new directors must now undergo identity verification with Companies House before their appointment is registered. Continuing to act as a director without verification is itself an offence under the Companies Act 2006, and non-compliance can trigger financial penalties, referral to the Insolvency Service, or prosecution.

When the director is also a shareholder

This is where removal becomes significantly more complex. We look at several interconnected risks:

• Bad leaver provisions. If these apply, the departing director may be required to transfer their shares at a reduced value. The exact terms depend on the wording of the articles or shareholders’ agreement.
• Settlement agreements. We handle these as specialist litigation solicitors. Compensation and damage payments carry tax and contractual implications that must be managed carefully. Any agreement should also address confidentiality obligations, which survive removal and extend beyond the director’s term.
• Employment claims — if the director holds an employment contract, removal from the board doesn’t automatically terminate that contract. Done incorrectly, this creates exposure to an unfair or constructive dismissal claim. We’ll advise on the correct process to minimise that risk.

Deadlock and other complications

A 50:50 shareholding deadlock is one of the most difficult scenarios. Where neither party can outvote the other, formal removal under Section 168 may not be achievable — and a negotiated exit or shareholder dispute process may be the more realistic path.

If there’s only one director, you must appoint a replacement at the same time as, or before, the removal. A private limited company is required by law to have at least one director at all times.

Depending on the value and prospects of your case, we may be able to act on a Conditional Fee Arrangement (No Win No Fee) or Damages-Based Agreement. Subject to case assessment and our funding criteria. Available on qualifying disputes typically valued over £10,000 with strong prospects of success.

Frequently Asked Questions

How hard is it to remove a director from a company?

On paper, it’s easy to remove a director under Section 168 of the Companies Act. However, the reality is that the process is usually contentious and carries significant risks both legally and commercially.

It’s essential to take legal advice from the outset to find the right structured approach and mitigate the risks and difficulties.

How quickly can a director be removed?

If a director resigns voluntarily with the inducement of a generous settlement agreement, then this can take just a few days. A formal removal under the Companies Act takes longer because of the notice requirements ahead of the meeting.

The articles of association or shareholders’ agreement may contain provisions which provide for a middle ground with a defined process and tighter timelines.

Who has more power, a director or shareholder?

That depends on the definition of power. Shareholders, especially majority shareholders, can exert significant influence through their voting rights and resolutions. However, a director tends to have more day-to-day control over the company.

Beware removing a director who is also a large or majority shareholder. A disgruntled former director can use their shareholding to make their presence felt and cause significant disruption.

Can directors remove another director without shareholder approval? 

No. Under UK company law, removing a director requires an ordinary resolution passed at a general meeting (not in writing) which must be approved by a simple majority of shareholders. The meeting requires special notice to the company members of at least 28 days. 

Need Advice? Contact Helix Law.

Feeling daunted or overwhelmed is not unusual when faced with a situation where director removal seems to be the only option. It’s hard to see the wood for the trees and you can end up making a bad situation worse. Taking legal advice early gives you the most options.

We’re a team of specialist litigation solicitors providing practical and commercial advice on all aspects of director and shareholder disputes. We review your corporate governance and shareholder agreements helping you find the right pathway for director removals that minimise costs and risk.

Our advice is strategic and tailored to your individual situation and company. We look at all options and ensure any action protects your business, is compliant, and that you fully understand the implications.

If you’re unsure of where to start or you’re already in dispute with a director, then contact Helix Law today for a no-cost, no-obligation initial conversation with our specialist commercial litigation solicitors. Our team act nationally and we’d love to help you.