Directors play a pivotal role in steering a company towards success. However, there may come a time when it becomes necessary to remove a director. Whether due to internal disputes, performance issues, or incapacity, the removal process must comply with the company's Articles of Association, the Companies Act, 2015, and the Employment Act, 2007. In this article, we will outline the key provisions and proper steps to follow when removing a Director from office. 

The first step in removing a Director from office is to review the company's Articles of Association. This legal document outlines the rules and regulations of a company. These internal rules may provide specific procedures or conditions for the removal of a director including the voting threshold and the notice period for the meeting. In the event that the Articles do not provide clear steps for removal, the Companies Act will apply. 

Provided the Articles of Association do not specify otherwise, Section 287 of the Companies Act requires that a special notice of 28 days is given to all shareholders and directors of the intention to propose removal. It is essential that this notice also reaches the outgoing director, even if they are not a shareholder. This transparency ensures that the director is aware of the upcoming resolution and has an opportunity to respond and exercise their right to protest. Explore our customizable notice templates for your needs.

Under Section 141 of the Companies Act, the outgoing director has the right to challenge their removal. Upon receiving a notice of the resolution to remove them, the company must forward a copy to the director. The director can: 

The company must circulate the director’s written defense to shareholders. Should these representations arrive late to the meeting, or if the company fails to circulate them, the director can request that their defense be read aloud during the meeting. The Director must then submit an affidavit and letter of resignation to the Company. Explore our affidavit and letter here.   

The next step in removing a director from office involves convening a general meeting with the company’s shareholders to deliberate on the resolution for the director's removal. According to Section 139 of the Companies Act, a director may be removed from office by an ordinary resolution. This resolution may be passed even if the director has a contractual agreement that suggests otherwise.  An ordinary resolution will pass if a simple majority is received. Should the resolution for removal pass, the director will be removed. The vacancy created by the removal, if not filled immediately at the general meeting, can be treated as a casual vacancy, which can be addressed later by the company. A special resolution will be required where there is an appointment of another director replacing the resigning Director. In circumstances where the outgoing director holds shares, the company shall require a Board Resolution for Transfer of Shares if their shares are being transferred to another person. Where the shares are being voluntarily surrendered the director must submit an Affidavit for Surrender of Shares. Access the Board Resolution for Transfer of Shares Template and the Affidavit for Surrender of Shares Template to get started.

The company is then required to inform the Registrar of Companies of this resignation within 14 days per Section 138 of the Companies Act. This notification ensures that the removal of the director is reflected in official company records. The company will be required to provide documentation to that effect to demonstrate the process was done compliantly, in accordance with the Articles and Companies Act. The application is made in the business registration service portal on ecitizen.  

Once a director is removed, they remain subject to certain duties. These include avoiding conflicts of interest relating to information or opportunities that they were privy to during their tenure and not accepting third-party benefits related to decisions made while they were in office. 

Conclusion 

The removal of a director in Kenya follows a structured legal process designed to balance the rights of the company with those of the director. Companies must ensure that the procedural requirements, such as the notices and opportunities for directors to respond, are adhered to. Although a director can be removed before their term ends, the law protects them from unfair treatment, including safeguarding their rights to compensation and giving them a platform to challenge the removal decision. 

 At CM SME Club, we offer comprehensive company secretarial services, expert legal advice in company law, and provide a wide range of customisable company document templates. Contact us today at law@cmsmeclub.com to learn how we can support your company.