Thursday 21 May 2015

How to Remove A Stubborn Company Director Legally



Dear Chege Kamau,

My name is SETH, in the course of my business I registered a company and included my friend  MWANGI, as a shareholder and director, since registration my friend has never contributed anything and now he is causing problems in the coming and always pulling my company down.
Please advise me on how to remove him?

ADVISE
Thank you Mr Seth for your question.
Well it is important to note that a stubborn director can bring down a company, by causing wrangles and friction in the board. This might eventually cause the Winding Up of The Company ie legally killing the company, on grounds of deadlock in the management  

When you are in total disagreement, such a director can also claim a share of the company as such he should be removed as early as yesterday.

Mr  Seth, you however need not worry as Kenya is a rule of law country, which provides legal solutions to our problems. Thus when you want to remove a director from your company this is how to go about it legally.

1.First and foremost you need to understand that   a director of a company is an
officer of the company as such he must be removed with due regard to
the law, he therefore can be removed as follows;
a)     Serve the director with a special notice of at least 28 days.
b)    Convene a meeting.
c)     Give the director an opportunity to be heard or explain himself.
d)    Pass a resolution to remove him, if the majority supports the
resolution then he is validly removed.
e)     After removal, the registrar must be informed of the changes by
filling FORM 203A.
f)      If he does not attend the meeting and there is evidence of
service, then you pass resolution.
2.      Please remember that the removed director can challenge the removal in court,
but the majority rule will always prevail unless he proves fraud or
oppression.
3.   Lastly kindly note that in the  alternative if the directors of a company are in good
relations then the directors and or shareholders can execute transfer form, affidavit and a letter indicating that there are no longer interested to be shareholders or directors of the company, then the same should be filled with the registrar. This should be done by your Advocate.

From the foregoing it is clear that the company will in most cases require at least three persons, so that majority can dominate in the board as such if the company has two directors or shareholders, then you should bring one or two shareholders or directors into the company by transferring part of the shares to the new persons, this can also be done by your advocate.

I hope you will find this advice helpful and I wish you all the best.