At least one director must be appointed upon company formation, but it is possible to appoint new directors subsequently. If a director decides to resign, it may be necessary to appoint a new director, particularly if there is only one director in the company. In this blog we will consider the process which must be followed to appoint a new director.
How to appoint a new director
The first thing to do before appointing a new director will be to decide on any requirements for the role. It will generally be a good idea to have a board meeting to discuss any specific criteria for potential candidates.
Aside from general traits such as trustworthiness and integrity, the company may want to appoint a new director with particular skills or experience. For example, a new technology company may want to find a director who has a successful track record of growing tech startups.
Make sure your new director is eligible
To ensure that you appoint a new director who is eligible for the role, it is important to check that all of the following are true:
- the potential director is at least 16 years of age;
- is not currently disqualified from being a director;
- is not an undischarged bankrupt; and
- is not auditing (or going to be auditing) the company.
It will also be necessary to check the company’s articles of association in case there are any specific requirements for company directors.
If you are using Model articles this will not be an issue, but some bespoke articles may include terms which prevent certain individuals from being an officer of the company.
Get approval to appoint a new director
The company’s articles will specify the approval which must be sought to appoint a new director. This will generally be done in one of two ways:
1. Board of directors
In the case of companies that have adopted Model articles, the appointment of a new director can be approved by way of a simple majority of votes at a board meeting.
Alternatively, a written resolution can achieve the same result, but it must be unanimous.
2. Shareholders
Some companies may decide to ask their shareholders to approve any decision to appoint a new director. In this case, a general meeting of shareholders will need to be called, and an ordinary resolution will be put to the vote.
A majority of votes will be required to confirm approval of the choice of director. Alternatively, a written resolution can be put forward, to avoid having to call a meeting.
Appointment letter
The new director needs to sign a letter that confirms that they consent to act as a director of the company. This consent to act is a requirement of the Small Business, Enterprise and Employment Act 2015.
Report the new appointment to Companies House
Once approval to appoint a new director and a consent to act from the appointee has been obtained, it will then be necessary to report the appointment with Companies House using form AP01, so that it shows up on the public register and is official. This must be completed within 14 days of the appointment, in line with section 167 of the Companies Act 2006.
The information required for registering the details of a director include:
- Date of appointment of new company director
- Full name
- Nationality
- Date of birth
- Correspondence address (also known as the service address)
- Residential address
Reporting the appointment can be done by post using a paper form, or online using Companies House WebFiling. Alternatively, Quality Company Formations provide a Director Appointment Service at a cost of only £29.99 plus VAT. This service includes registration with Companies House, minutes of the appointment, and an appointment letter.
Update registers
In addition to registering the appointment of a new director with Companies House, it is also necessary for the company to update its own statutory Register of Directors and Register of Directors’ Residential Address.
Director’s service agreement
If you appoint a new director who serves as a company employee, it is a legal requirement to provide them with a written document summarising the main terms of their employment. This is known as a “written statement of employment particulars”.
These written terms must be provided on or before the first day of work. In practice, the written terms will normally be contained in a contract of employment. However, it’s worth noting that an employment contract is not a legal requirement.
Company directors who are employees will normally have a director’s service agreement. This is essentially a contract of employment with a few extra terms. A service agreement should be drawn up and signed by both the director and the company before they start their role.
But many company directors do not have an employment relationship with their company, e.g. in the case of a sole company director and owner.
A Company Director is ultimately responsible to the Shareholders of the Company he/she is a Director.
The Board of Directors can appoint a new Director to join the Board with no reference to the Shareholders at any time.
However, does the new Director, have to be approved by the Shareholders at a General or Annual General Meeting if not stated in the Articles of Association. If not why not since Directors appointed at the Formation of a Company have to be approved by the then Shareholders.
Thank you for your kind enquiry, Dudley.
The Companies Act 2006 does not specify a specific procedure companies need to follow in order to appoint a new director. As such, it is presumed that the shareholders are able to make the appointment using an ordinary resolution (which requires greater than 50% of the votes to be cast in favour of the resolution for it to be passed). This can either be done at a General Meeting or by written resolution of the members.
However, companies are generally free to add in their own provisions dictating how director appointments can be made. The most common of such clauses is by decision of the directors themselves. In the absence of any such provisions, including those dealing with alternative appointment methods, it would normally be presumed any director appointment needs to be made by the shareholders. This can be made at a general meeting, although usually it could also be carried out by written resolution instead (avoiding the need for a general meeting).
We trust this information is of use to you.
Kind regards,
The QCF Team