Professional Documents
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TIO N F: Ubmitted By:-1) Jwalin Desai (09BAL010) 2) Shivang Jani (09BAL019) 3) Chintan Patel (09BAL039)
TIO N F: Ubmitted By:-1) Jwalin Desai (09BAL010) 2) Shivang Jani (09BAL019) 3) Chintan Patel (09BAL039)
TIO N F: Ubmitted By:-1) Jwalin Desai (09BAL010) 2) Shivang Jani (09BAL019) 3) Chintan Patel (09BAL039)
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Submitted By:-
1) Jwalin Desai (09BAL010)
NIRMA UNIVERSITY 3
1. PUBLIC COMPANY:-
Removal by other Directors-
It is not possible for directors of a public company to
remove another director. This is prohibited by section
128(8).
Removal by members-
The members of a public company can remove a director by
giving special notice to the company to remove him,
(usually a simple majority) notwithstanding any provision
in the Articles.
According to S.128(2) Special notice of the resolution to
remove a director is required that is not less than 28 days
notice to the company of the intended resolution.
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According to S.153On receipt of the special notice of
resolution, the company must then give notice of the
resolution to its members at least 14 days before the
meeting. If the twenty-eight days grace period was not
complied with, the resolution shall not be effective.
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2. PRIVATE COMPANY:-
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ENTRECHMENT OF DIRECTORS
In Private Company:-
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1. Where the director has resigned
If a director wishes to resign from a company, they
must submit the form 288b to Companies House.
2. Where the shareholders or other directors wish
to remove the director from office
Removal of a director must be conducted in
accordance with Section 303 of the Companies Act
1985.
By S.303 of the Companies Act 1985 a company may
remove a director by ordinary resolution(by majority
of share holders).
Once the Special Notice period (28 days) has
expired, the company must then send a copy of the
resolution to the director concerned.
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AUTHORITY OF COMPANY
The company may
1. Disqualify Director
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1. Disqualification of Director:-
The courts have the power to make orders
disqualifying company directors. It applies not
just to persons who are formally appointed as
directors but to those who carry out the
functions of directors.
Potential causes of disqualification include:-
Allowing the company to trade while insolvent
Not keeping proper accounting records
Failing to prepare and file accounts
Not sending returns to Companies House
Failing to send tax returns and pay tax
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2. Termination of Directors:-
The Model articles, for example, provide that a person ceases
to be a director as soon as:-
That person ceases to be a director by virtue of any
provision of the Companies Act 2006 or is prohibited
from being a director by law
A bankruptcy order is made against that person
A composition is made with that person's creditors
generally in satisfaction of that person's debts
By reason of that person's mental health, a court makes
an order which wholly or partly prevents that person
from personally exercising any powers or rights which
that person would otherwise have
Notification is received by the company from the director
that the director is resigning from office, and such
resignation has taken effect in accordance with its term.
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OTHER GROUNDS FOR TERMINATION
OF DIRECTOR
1. Dismiss summarily for gross misconduct
2. Serve notice and require director to work notice
period
3. Terminate instantly under express payment in
lieu provision
4. Lack Confidence
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i re c to r’s
ag i n g D l
Man Is L aw fu
a t io n
Termin o t ? ? ?
or N
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The Finnish Supreme Court has confirmed
that the board of directors of a limited
company are entitled to dismiss the
managing director of the company solely on
the basis of lack of confidence and without
any obligation to pay compensation, unless
the parties have agreed otherwise.
CASE:-
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1. Background:-
in this case the managing director had been managing
the company since September 1986. In July 1998 the
company's board of directors decided to dismiss the
managing director immediately, due to a lack of
confidence.
There was no written contract between the parties in
which they would have agreed terms, such as length of
notice.
The managing director considered the dismissal
groundless, and claimed damages and compensation
for a reasonable notice period.
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2. Legislation:-
Under the established legal principle a company's
managing director is not an employee of a company.
3. Decision:-
Both the district court and the court of appeal held that
there was a tacit contract of service between the
company and the managing director. Therefore, the
company was obliged to pay compensation for a notice
period. The courts fixed the notice period at five months.
In contrast, the Supreme Court held that there are no
limitations in the Finnish legislation regarding the
termination of a managing director. Therefore, the
Supreme Court held that the termination of the
managing director on the basis of lack of confidence was
lawful. The managing director's action was dismissed.
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CONCLUSION
Directors hold office at the behest of the
shareholders and at the end of the day, unless
there is a valid compensation agreement for
removal before expiry of a director’s term of office,
the director so removed may have little recourse in
law.
NIRMA UNIVERSITY 21