The appointment and removal of directors play a crucial role in corporate governance. To ensure transparency and compliance, SSM has issued Practice Note No. 9/2024, published on its official website, providing guidance on the proper procedures for notifying the appointment and removal of directors under Section 58 of the Companies Act 2016 (CA 2016).
Who Can Appoint and Remove Directors?
The power to appoint and remove directors generally lies with the members (shareholders) of the company. However, in certain situations, such as filling a casual vacancy or adding an additional director, the Board of Directors is also authorized to make appointments. Regardless of who appoints or removes a director, the company is required to notify the Registrar (SSM) within 14 days of any such changes. Failure to do so will result in late lodgment fees and potential compliance issues.
The Notification Process and Required Documents
When a company appoints a new director, it must submit an official notification to SSM. If the appointment occurs at a general meeting, this notification must be accompanied by an extract of the resolution passed at the meeting. This document must be signed by at least one existing director (not the newly appointed one) as well as the company secretary.
In cases where a new director is appointed to fill a casual vacancy or as an additional director, an extract of the board resolution will suffice. This extract must also be signed by at least one existing director and the company secretary before submission to SSM.
The process for removing a director follows a similar structure. If a director is removed through a general meeting resolution, the company must notify SSM and provide an extract of the resolution, which must be signed by a director at the time of removal and the company secretary. However, if the entire board of directors is removed, the notification must include an extract of the resolution signed by either one of the removed directors, the secretary at the time, a newly appointed director, or a newly appointed secretary.
Special Considerations for Director Removal
The removal of a director is not always straightforward. Under Section 206(3) of CA 2016, a company must issue a special notice if it intends to remove a director and appoint another in their place at the same meeting. Additionally, a director’s removal will only take effect once a replacement has been appointed, ensuring that the company maintains the required minimum number of directors as mandated by Section 196 of CA 2016.
There are also situations where a company may struggle to comply with this requirement, such as when the directors cannot be contacted or the company secretary has resigned. In such cases, the procedure outlined in Practice Note No. 9/2024 provides clarity on how to proceed with the necessary documentation.