Director Disputes

Disputes among directors or between directors and shareholders often encompass a blend of commercial and legal rights and remedies. Shareholders may perceive that management decisions, such as awarding substantial bonuses to directors rather than declaring dividends, adversely affect their interests. Conversely, directors may find themselves in conflict with the board or other members, despite their intentions to act in the company’s best interest.

Directors’ Roles

Directors frequently hold multiple roles within a company, including being a shareholder and an employee. This multiplicity can complicate disputes, as each role requires different considerations and strategies. Effective resolution typically involves a coordinated approach addressing all these roles to achieve a swift resolution.

Removing a Director

Removing a director from the board requires following a specific process and securing the necessary majority of shareholders. Directors who are also shareholders may resist removal, as it could impact their shareholder interests. To proceed, a shareholders’ meeting must be convened, with at least 21 days’ notice given to all members and the director in question. For removal, a resolution must be passed by shareholders holding more than 50% of the issued share capital. Additionally, all documentation related to the meeting and the resolution must be duly recorded and filed with the Company’s Registration Office.

Terminating a Director’s Employment

Even after a director is removed from the board, they may still be an employee and hold shares. Terminating their employment involves adhering to standard employment rights and procedures. This includes:

Suspension

Placing the director on full pay pending investigation, with a detailed letter outlining the investigation and potential disciplinary actions.

Disciplinary Hearing

Conducting a formal hearing to address the issues.

Sanction

Imposing penalties, which could include dismissal.

Appeal

Allowing the director to appeal the decision.

Note: Proper execution of these steps is crucial to avoid claims for wrongful or unfair dismissal, as well as potential shareholder disputes under the Companies Act 2014.

Recovering the Director’s Shares

Post-removal, a director’s shares must be addressed. Without explicit provisions in the service contract or shareholders’ agreement, reclaiming shares can be challenging. If a shareholders’ agreement exists, it should outline the terms for dealing with shares of departing directors. In the absence of such provisions, negotiations are necessary to resolve share ownership issues.

Corporate Governance Under the Companies Act 2014

The Companies Act 2014 introduced significant changes to Irish company law, including:

Directors’ Duties: Codifying common law fiduciary duties alongside existing statutory obligations.
Compliance Statements: Requiring PLCs and large private companies to include compliance statements in annual accounts.
Disclosure of Interests: Exempting directors from disclosing small shareholdings (less than 1%).
Directors’ Addresses: Allowing non-publication of residential addresses for security reasons.
Company Secretary: Directors must ensure the company secretary has the necessary skills and resources.
Annual General Meetings (AGMs): AGMs are now optional for LTDs and single-member DACs; written resolutions can replace AGMs.
Majority Written Resolutions: Introducing new mechanisms for passing resolutions.
Serious Loss of Capital: Private companies are no longer required to hold extraordinary general meetings for serious losses of capital, though PLCs still must.

Contact Us

For more information or to discuss how we can assist with director disputes or other corporate governance issues, please contact us at cormac@fitzcorpinsol.ie or call +353 (1) 213 5910 . We are here to provide expert advice and support tailored to your situation.

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