Booting Or Remove A Director Out Of The Company

We have assisted numerous clients regarding the company and corporate issue:

Call Us Contact Us Book Consultation


In this article, we will briefly touch on the topic of the director’s removal.

The law that enables the removal of a company director

Section 206 of the Companies Act (the Act)1. In this regard:

  1. If it is a private company, a director may be removed before the expiration of the director’s period of office via ordinary resolution, subject to the company’s constitution2.
  2. If it is a public company, the removal is via an ordinary resolution, notwithstanding anything in the constitution or any agreement between the company and the director3. However:
    1. A special notice is required of the resolution to remove the incumbent director / appoint another person to be the new director in the meeting4;
    2. A director who was appointed to represent the interest of any particular class of shareholders/debenture holders cannot be removed until a successor has been appointed5.

How must it be done?

  1. For a director in a private company- refer to the company’s constitution.
  2. For a director in a public company, via a special notice6.

When can a director be removed?

The High Court in Low Thiam Hoe & Anor v Sri Serdang Sdn Bhd & Ors7 (who relied upon the Hong Kong case of Yeung Bing Kwong Kennet v Mount Oscar Ltd8) noted that as the statutory right to remove a director was unqualified, there was no requirement that reasons be provided for a director’s removal. In this regard9:

“The power given to the shareholders is unfettered and may be used for a number of aims. It allows shareholders to remove directors who are performing poorly, as well as those acting competently and within their powers but in a way that may be contrary to the wishes of the shareholders. This is an apparently ‘tough mandatory rule’ that allows the shareholders by ordinary resolution at any time to remove any or all of the directors from office without having to assign a reason for so doing. There is simply no requirement that the power to remove a director must be exercised for a cause. Closely related to the above is the elementary principle of law that the court will not interfere with the internal management of companies acting within their powers and in fact, has no jurisdiction to do so. Further, the court holds fast to the rule not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment. Hence, the court had refused to grant an interlocutory injunction to restrain a company from acting on a resolution to remove a director on the ground that the resolution was a nullity due to irregularities, as the irregularities could be cured by going through the proper processes and the ultimate result would be the same.”

When is the act of removal of the director considered illegal?

The court noted that even though the statutory right to remove a director was unqualified and as such there was no requirement that reasons be provided for a director’s removal, the court will still intervene when the power is used for a collateral or improper purpose10. For example:

  1. When no proper notice is given11;
  2. When a resolution to remove a director was tainted in bad faith12; and
  3. When the removal was to prevent the director from continuing to bring an action against the company13.

What can a director do (before bringing the matter to court)?

  1. For a director in a private company- refer to the company’s constitution.
  2. For a director in a public company, the director must be given the right to make oral representation or written representation within a reasonable time from when he was removed as a director via the resolution14.

1. 2016.
2. Section 206 (1)(a), Companies Act 2016.
3. Section 206 (2), Ibid.
4. Section 206 (3), Ibid.
5. Section 206 (4), Ibid.
6. Section 207 (1), Companies Act 2016.
7. [2020] 10 MLJ 137.
8. [2019] HKCU 2413.
9. Paragraph 23 and 23, Yeung Bing Kwong Kenneth v Mount Oscar Ltd [2019] HKCY 2413.
10. Paragraph 20, Dato’ Raja Azwane Raja Ariff v Dato’ Man Mat & Ors [2011] 8 CLJ 633.
11. Dato’ Raja Azwane Raja Ariff v Dato’ Man Mat & Ors [2011] 8 CLJ 633.
12. See Teow Chuan & Anor v YAM Tunku Nadzaruddin Ibni Tuanku Jaafar & Ors [2007] 2 CLJ 82.
13. Koh Jui Hiong @ Koa Jui Heong & Ors v Ki Tak Sang @ Kee Tak Sang & Ors [2009] 8 MLJ 818.
14. Section 207 (2), Companies Act 2016.

Leave a Reply

Your email address will not be published. Required fields are marked *

Fareez Shah and Partners