Removal of Directors

Key Takeaways

• Among some of the reasons for the removal of a director in a private limited company are the director’s bankruptcy, mental incapacity, and unauthorised absence 
• How to remove a director from a company depends on the company’s Articles of Association 
• Before removing a director from a company, the company must first pass an ordinary resolution
• The removal of director form (ND2A) should then be filed in the next 15 days to notify the Companies Registry of the change 

Though the director is an indispensable cog in the corporate machine, it does not necessarily mean that a company will have just one director in its lifetime. 

Perhaps your current director has resigned; perhaps the director and the shareholders’ visions for the company no longer align. In any case, the departure of the current director must be handled in a compliant manner. 

On what grounds can you remove a director?

In Hong Kong, an individual ceases to be a director when any one of the following happens: 

1. The person is prohibited by law from being a company director.
2. A bankruptcy order is made against the person.
3. The person becomes mentally incapable of acting as a director.
4. The person resigns from the role by giving a formal notice 
5. The person has been absent from the director’s meeting for more than six months without the consent of other directors.
6. The members pass an ordinary resolution to remove the director.
7. The director passes away 

Some kinds of directorship cessation are easier to handle internally than others. For instance, if your director resigns, the director simply needs to submit a resignation letter to notify the board of directors, which will then hold a meeting to approve the resignation. 

It is the dismissal of a director by shareholders that requires a relatively more complicated process of approval, and to protect your company from legal risks, it is imperative that this is handled in a compliant way that ensures fairness to all parties involved. 

Removal of director in private limited company: who decides?

The procedure to remove a director from your company is governed by your company’s Articles of Association, which can be thought of as an internal “rulebook” that all shareholders have agreed to at the moment of incorporation. Amongst companies who have adopted the Model Articles provided by the HK government, it is the shareholders who have the authority to remove a director. 

However, companies are also free to alter their Articles of Association, provided that the changes align with HK company law. For example, you may add a clause to your Articles to permit the board of directors to remove an existing director. 

This is why, before starting the process to remove a director, go through your company’s Articles and check for any restrictions.

Step 1: Securing approval for removing a director from a company

If a member wishes to propose a resolution to remove a director, they must give special notice of the general meeting to the company. In other words, the shareholder must notify the company and the director concerned of the meeting at least 28 days in advance. 

This requirement for special notice gives time to both shareholders and the director concerned to respond. This director may make written representations for himself and demand that they be circulated amongst the shareholders, or he may have them read out during the general meeting. The director is also entitled to address the shareholders directly there. 

If the shareholders decide to go through with the decision to remove the director, then they simply need to pass an ordinary resolution (i.e. secure a simple majority of shareholder votes) to authorize the change. The effective date of the director’s removal is the date on which this resolution is passed.

Step 2: Fill in the Removal of Director Form ND2A

Within 15 days of the effective date, the company must file Form ND2A Notice of Change of Company Secretary and Director (Appointment/ Cessation) at the companies registry. This form will provide the HK government with the personal details of the removed director, and the reason for their removal. You may fill in the form yourself, or enlist the help of your company secretary 

The form may be filed online via the government’s portal, or delivered by post or in person to the Companies Registry’s office. 

How much does it cost to remove a director from a company?

The HK government does not charge a filing fee for Form ND2A, though most, if not all, corporate service providers will charge a service fee to complete the filing for you. 

There is no reason the removal and appointment of a director cannot be handled in tandem. In the same general meeting to remove a director, the shareholders may also appoint a new director to replace them. And, on the same form to notify the government of the removal of a director, the company may also notify the government of the entrance of a director into the company. 

Few entrepreneurs can afford to mishandle sensitive corporate decisions like director removals. If you’d like targeted advice on streamlining corporate governance and implementing significant changes in a professional and compliance way, feel free to reach out to one of Get Started HK’s experienced consultants.

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