When a director’s days are numbered… removal of directors under the Companies Ordinance of Hong Kong23Aug2022
Members of a Hong Kong private company may remove a director without cause subject to the requirements set out in the Companies Ordinance (“CO”).
The general requirements are set out in s. 462 and s. 463 of the CO. They are:
- A director may be removed in a general meeting by an ordinary resolution of members prior to the expiration of his term of office. Ordinary resolution of the members means a resolution that is passed by a simple majority of the members present at the meeting. The ordinary resolution must be passed in a general meeting and not by way of a written resolution of the members.
- Any member proposing the removal of a director must first give a “special notice” notifying the company of the proposed resolution to remove a director. The special notice must be given by the member to the company at least 28 days before the relevant general meeting.
- A general meeting should be called by the Board by giving the members at least 14 days’ notice.
- The director concerned may make written representations in relation to the proposed removal and require them to be circulated to members of the company or read out at the general meeting itself. The director concerned is also entitled to be heard at the meeting at which the resolution is voted on.
- The removal of a director is not to be taken as depriving the director concerned of any compensation or damages which may be payable (such as payment of damages for breach of the service contract with the director).
In a recent Hong Kong case, the applicant contested his removal as a director of a company on the grounds that he was not given reasons for his removal. He argued that he had the right to be informed of the reasons for removal so that he could make representations in a meaningful manner. The Court of Appeal dismissed the appeal and was of the view that it was not the legislative intent for directors to be given reasons for their removal under s. 462 of the CO. The protection given to the concerned director in s. 463 were already sufficient, given that the concerned director is entitled to make written representations and be heard on the resolution at the meeting at which the resolution is voted on.
In all, for removal of a director under s. 462 and s.463 of the CO:
- There are some specific procedural requirements that must be followed before the ordinary resolution for removing the director can be presented in the general meeting and voted on.
- No reason is needed for the removal of directors.
Tim Drew and Carol Ling
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.