Section 71 of the Companies Act provides that a director may be removed in one of three ways: by way of an ordinary shareholders’ resolution, a board resolution (at a board meeting) or by the Companies Tribunal.
In the case of removal by the board or by the Companies Tribunal, the procedure to be followed depends on the number of directors on the board. In the case of three or more directors, a board resolution will suffice, whereas in the case of two or less directors, the Companies Tribunal must determine the removal of the director on application by a shareholder or director. Any director or shareholder of a company with fewer than three directors may apply to the Companies Tribunal to make a determination contemplated in section 71(3) of the Companies Act.
Section 71(3) of the Companies Act allows any shareholder (or any director as the remedy is not limited to shareholders) of a company, regardless of the size of his/her shareholding or influence in the company, to allege that a particular director has:
- become ineligible or disqualified or incapacitated to the extent that he/she is unable to perform the functions of a director, and is unlikely to regain that capacity within a reasonable time, or
- neglected, or been derelict in the performance of, the functions of director,
then the board, other than the director concerned, must determine the matter by resolution and may remove a director deemed to be so ineligible or disqualified, incapacitated, negligent or derelict, as the case may be. The board must then call a meeting of directors to determine the matter. The beleaguered director is then given an opportunity to make representations, in person or through a representative, at the board meeting which entails being given a prior notice (at least equivalent to the time which a shareholder is entitled to receive such notice) of the meeting and the resolution. It must be noted, however, that shareholders need not have a reason in order to remove a director using section 71(1) of the Companies Act. Further, the removal of directors in terms of section 71 of the Companies Act applies in respect of all directors even if elected for an indefinite term.
If a director is removed, he/she will be entitled to recourse to the court to review the determination to remove him/her. Conversely, should the director not be removed by the board, the directors who voted in favour of the removal of the director in question, or the aggrieved shareholder who initially laid the complaint, or any holder of voting rights entitled to be exercised in the election of that director, will likewise have recourse to the court to review the determination.
Where the MOI does not require that written notice of resignation is required, a director may resign from his/her office by giving written or oral notice of resignation. Where the MOI provides that a director is to vacate his/her office ipso facto if, by notice in writing to the company, he/she resigns, an oral resignation, if accepted by the company, is nevertheless effective. However, unless the MOI provides otherwise, acceptance by the company (or the directors, if the MOI requires the notice to be given to them) of a resignation by the director in accordance with the MOI is not a pre-requisite to the effectiveness of the resignation, which ordinarily is a unilateral act not dependent for its effectiveness on its acceptance. Consequently, notice of resignation given in accordance with the MOI which does not render its effectiveness dependent on its acceptance by the company (or the directors) cannot be withdrawn without consent.