Resignation Director vs Removal of Director
Resignation director is a process where director is sending their intention to leave the board.
Reason can be any of the following :
- health issue
- better opportunities
How to proceed ?
As long as company received notice of resignation then resolution to approve his resignation will be prepared.
Resignation of director will take effect once lodgment is done with ACRA .
Removal of Director normally occur because of hostile reason as follow :
- disagreement among director
- shareholder NOT agreed with director
- director breach of duties (ie conflict of interest)
- Director involved with criminal activity / corporate scandal
- director ‘s bankruptcy
How to proceed ?
Company will need to remove director via shareholder right .
14 days notice will be given to conduct general meeting to vote for removal of director .
What happen to the share held by relevant director ?
There is scenario where appointed director also shareholder of the Company .
You will need to check the company constitution is that any clause required director to sell his shares upon cessation of his directorship ? If No then he is free to hold on the share .
Related article : Debarment vs Disqualification of Director
Before removal or resignation of director take place , it is important to ensure minimum number of director is meet after this changes take effect.
If the resignation or removal director is the only appointed local resident director then management must replace him before this changes take effect.
Management must take into consideration if the Company constitution stated clearly number of director quorum needed to pass director resolution.