Court ruling enables company to remove estranged director

A High Court ruling has enabled a company to remove a director who had become estranged from the business following a dispute over alleged breach of duties. 

The company had two members and four directors. Three of the directors, including the majority shareholder, believed that the fourth director, Mr Christopher Stephen Jones, who was the minority shareholder, had acted in serious breach of his duties.

In February 2018 he was placed on garden leave pending an investigation and taken off the company's bank mandate. 

In November 2018 the majority shareholder, Peter David Schofield, asked that a general meeting of the company be called to remove Mr Jones as a director. However, Mr Jones declined either to attend or to agree to the meeting going ahead in his absence. The company's articles of association did not permit one member to constitute a quorum; there had to be at least two.

Mr Schofield applied to be allowed to hold the meeting with a quorum of one, arguing that Mr Jones was frustrating the board's efforts to remove him. 

The court granted the application. It accepted that each side had alleged wrongdoing by the other, and the court was not in a position to determine the merits of their allegations.

However, it was clear that there had been a serious falling out, that three of the directors had lost confidence in the fourth, and that the majority shareholder wished to exercise his statutory right to remove him. To deny the application in such circumstances would be tantamount to imposing a director on the company, which would be highly impractical.

Please contact us if you would like more information about the issues raised in this article or any aspect of company law.

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