corporate-law england-and-wales shareholders
Conflict of interest when removing a director
<p>I work for a UK limited company with two shareholders, and two directors. I am one of the directors and the majority shareholder (over %50 of total shares). The company's articles of association are the Model Articles from Companies House.</p>

<p>If I want to remove the other shareholder as director for poor performance, is it sufficient for me to call a general meeting with 28 days advance notice, and pass an ordinary resolution with my majority shares? Would the Companies Act 2006 allow such an action, especially in regards to conflict of interest law?</p>

<p>You have a fiduciary duty as a director to act in the best interests of the company. Not your interests, not his interests, not the shareholders' interests (individually or as a group); the company's interests.</p>

<p>You must also separate the other guy's performance as an employee from his performance as a director. If he is not performing as an employee then the correct course of action is to sack him as an employee, not as a director; and vice-versa. If he turns up to the board meetings and considers the information he is given as a director then he is not "performing poorly" in that role.</p>

<p>However, provided you follow the law and your company's constitution I have no doubt this would be legal. You need to consult a lawyer before you do anything - it can't be the company's lawyer because he <em>does</em> have a conflict of interest.</p>

<p>Notwithstanding its legality, it's a stupid idea. It doesn't fix the fundamental problem: you are in business with someone you don't want to be in business with. You need to find a way to not be in business with him and to start that process by ticking him off is a bad move.</p>

<p>You need to reach agreement on how to end your relationship: just shoving him out while he is still a shareholder will have him looking for the first opportunity to sue you and the company the instant it underperforms.</p>
