Getting Rid Of A Company Director Due To Poor Management: What You Need To Consider
When a company director is at fault, it can be difficult to remove them from a business. A director is an employee, as well as an officer for the business, so care needs to be taken when trying to get rid of them from your business. This will ensure your company avoids any claims or lawsuits. In this article, we will explore how to get rid of a company director due to poor management and what you need to consider as a business.
Check Contracts And Agreements
When trying to get rid of a director, the first thing you should do is check through all contracts and agreements that have been signed by the director and the business. This ensures you can follow the correct legal procedures when removing them from your business, especially if they own a share in the company. Failing to follow legal contracts that have been signed by both parties could cause the director to proceed with a lawsuit against you and the company for wrongful firing.
Read or hire a solicitor to go through the director’s service agreement, letter of appointment, and employment contract. Find out what terms have been agreed on in the case of termination of employment. If there is not a contract or the contract does not cover termination, you should speak to a solicitor to see what course of action should be taken to avoid a court case. Special care needs to be taken when getting rid of a director from your company, otherwise, they may have the right to claim unfair dismissal. You can find out more information about unfair dismissal so that you know how to avoid it.
You can also read through the articles of association and if the director is a shareholder, the shareholders’ agreement, as this should contain a procedure to follow if a director is going to be removed from office. If there is nothing written but your company was chartered under the Companies Act 1985, it should include Table A. This contains automatic rights to end a director’s association with the company, but only if certain circumstances have been met.
Make Sure You Have Sufficient Evidence
As removing a director is a tough situation, you must have enough evidence to support your claim, especially when avoiding the unfair dismissal route. Gather evidence of poor management, whether this is testimonials from other employees or proof of loss of income due to their actions. It can be difficult to know what proof to collect, but anything that can be shown against their name that has caused bad press or loss of income for the company is enough to prove poor management.
You should also speak to the director in question and save any email chains or forms of communication where you have discussed their actions and given them a chance to redeem themselves. Everyone has the right to a second chance, so if you have spoken to the director about this before, make sure it is in writing so you have proof of the conversation further down the line. If things get nasty and you do not have sufficient evidence, you could find getting rid of the director in question a lot harder than you first thought.
Keep Communication Formal
Often, directors of a company are friends with one another, and this can make the situation even more complicated. Whenever you are discussing work-related topics, you must keep this communication formal. Failure to do so could make it easier for any evidence to not hold up if a court case was brought against you by the director.
It may be worth having somebody else in the meeting room if you have a discussion with them, to maintain a professional working environment. This is also another person who can back you up if the director decides to make false claims against you. When someone turns against you, it can be difficult to remain formal and professional, but no matter what happens, you must not rise to their level. Working with friends or family and keeping business separate can be difficult, especially when you do not want it to ruin your relationship.
Remove Control Of High-Value Projects
If the company director is making poor management decisions, the next logical step is to remove control of high-value projects. This will ensure that no more money is lost from the company due to their negligent behaviour. Speak to them about it beforehand, making them aware of the reasons why. They may argue against this or attempt to change their behaviour, but as a business, you cannot put your trust in someone who has made multiple mistakes, despite their position in the company.
Depending on how many people are in your business, you may need to hire someone else to take over this role or do this yourself. This is something that needs to be discussed with management and any other directors before removing control of the high-value project from the director. It may be worth sitting with them on the project for a while and allowing them to step back slowly.
Once the director has been removed from the company, there is also a form that needs to be filed, known as a TM01 form. This should be filed at Companies House, only after the director has been removed from your business and is no longer shown as an officer of your business.
Consider A Professional Negligence Case
Poor management from a director can have devastating consequences for a company, especially if this was a high-value project or it has caused the loss of one of your most valuable customers. This trust and reputation can be difficult to rebuild, which is something else to consider when trying to remove a bad director from the company. No matter their position or how many shares they hold, if they are going to run the company into the ground, they are liable for their actions, and poor management can be classed as professional negligence.
To start a professional negligence case, you would need a portfolio of evidence, which is why you should start creating this at the first sign of trouble. When it comes to your word against theirs, it is much harder to build a case and most lawyers will not accept the case. Professional negligence cases are most successful when there has been a loss of reputation and/or a loss of income from the business.
This may be due to staff turnover because of poor management, loss of a high-value customer, or failure to reach a project deadline due to insufficient workload management. For more information on professional negligence compensation for your business, you should speak to a professional negligence lawyer. The professional negligence lawyers by Hugh James can discuss if you have the right evidence to make a case and what you should do next.
Getting rid of a company director due to poor management is a difficult process but one that is crucial if their management is detrimental to your business and employees. Start by checking through contracts and agreements, to understand their rights. Compile sufficient evidence, keep communication formal, and remove high-value projects from them. You should also consider a professional negligence case if the director has caused a loss of custom or a bad reputation for your business.