Not every employee that you hire will turn out to be the right person for the job. The same goes for company directors, who may need to be removed from the Board for a variety of reasons. This guide will walk you through the 4 simple steps you need to take to remove company directors in Singapore.
Summary of how to remove company directors:
- Call for a shareholders’ general meeting
- Pass an ordinary resolution to remove the director
- Appoint the director’s successor
- Update ACRA records with your new director’s details
Common reasons for removing a company director:
Company directors are accountable to their fellow directors and the company as a whole. If they’re not performing adequately, or have failed in their duties, then you may consider having them removed. Some common reasons that Boards remove their directors include:
- Breaching their director’s duties, which is a serious lapse of professional conduct
- Poor advisory skills or general lack of competence, leading to subpar performance of the company
- Friction with other board members or key members of management
- Personal indiscretions, like relationships with employees
Removal of directors must follow your company’s constitution:
Your company constitution will govern how directors can be appointed and removed. As such, if you have a constitution that varies significantly from the norm, you should reference your constitution when trying to remove a director. You should ensure that the removal of a director follows the requirements set out by your constitution, or legal action may be taken against the firm.
The steps listed here will be appropriate if your company’s constitution is either the frequently used Model Constitution, or if your constitution does not vary significantly from commonly adopted practices.
Step 1: Call for a shareholders’ general meeting
Generally, a director can only be removed via an ordinary resolution (i.e. a shareholder vote). To pass an ordinary resolution, you must first call for a shareholders’ general meeting. Send out notices to all shareholders at least 14 days in advance of the meeting.
You can shorten this 14-day advance notice period as long as your shareholders consent to it.
Shareholders’ meetings can be conducted electronically or via written means. You don’t have to meet in person.
Step 2: Pass an ordinary resolution to remove the director
At the shareholders’ meeting, hold a vote. If at least 50% of the shareholders vote to remove the director, then the ordinary resolution is passed.
Votes can be conducted electronically or via written means.
Who can remove a director from the Board?
Only shareholders can remove directors.
A director cannot simply remove another director. This is a very important legal mechanism that safeguards the interests of the company and its shareholders. Directors are charged with overseeing the company, and must act in the best interests of the firm, above their own interests. If a director could simply terminate another director for reasons like silencing dissent, then the board’s ability to remain an objective overseer for shareholders would be fundamentally crippled. Removing a director is a decision that can only be made through the will of shareholders.
Can a director be removed without their consent?
Certainly. As long as a simple majority of shareholders (above 50%) vote to remove the director, then the director’s objections are irrelevant. No one is ever willingly fired, but I suppose that’s very much the point of telling someone they have to go.
Can minority shareholders remove company directors?
Directors have to be removed by a simple majority of shareholders. If a minority shareholder is unhappy with a director, they will need to convince fellow shareholders on the strength of their case, and build alliances with them. Such an alliance of shareholders needs to form a voting bloc with a simple majority (above 50%.)
Such scenarios commonly occur with activist hedge funds, who may build minority positions of 5-10% in a public company, and then seek to oust current members of the Board to install their own directors. This is so that they can agitate for changes like a shift in strategy, particularly if the company has been underperforming.
Step 3: Appoint the director’s successor
Under Section 152 (1) of the Companies Act, your removal of a director will not be complete until after you appoint a successor. You must replace the terminated director with someone else, otherwise the person you wanted to remove will still remain a director!
To learn the 5 easy steps on how to appoint a director in Singapore, click here.
If you’re thinking about some qualities that are helpful to have in your new director, you may want to consider this list of useful board director characteristics.
Step 4: Update ACRA records with your new director’s details
You must update ACRA within 14 days of the removal of a director. You can do so via BizFile+, which is ACRA’s online business services portal.
Here are the steps to do so:
- Go to BizFile+ (click here for the link)
- Log in using your CorpPass
- Click “File eServices”
- Click “Local Company”
- Click “Make Changes”
- Click “Change in Personal Particulars of Company Officers”
- Fill in the details of the new director
How long does it take ACRA to reflect the changes?
Usually it takes 1-2 days for ACRA to process updates for the removal and appointment of directors.
What information do I need for my newly appointed director?
ACRA will require the following information to be provided:
- Name (with deed poll)
- NRIC, or FIN, or Passport number
- Residential Address
- Land line number
- Mobile number
Removing a director from a public company
Removing directors from a publicly-traded firm in Singapore follows the same steps outlined above.
- Call for a shareholders’ general meeting
- Hold a vote and pass an ordinary resolution
- Appoint the successor
- Update ACRA records
The only key difference is in Step 1 (calling for a shareholders’ meeting). For public companies, the advance notice period for a shareholder’s meeting is generally 28 days. Again, this advance notice period can be shortened as long as shareholders’ consent is given.
Sometimes, public company constitutions may provide for special requirements to remove directors – e.g. having to pass a special resolution, rather than an ordinary resolution. A special resolution requires at least 75% of shareholder votes to be effective, compared to the >50% mandated by an ordinary resolution. Make sure to follow the company’s constitution when removing directors of public firms.
Directors’ liabilities after removal
Director’s liabilities do not simply end when they leave their directorship. Directors can continue bearing liabilities for a long time even after they stop serving their companies.
Read our comprehensive guide about director liabilities after resignation here.