Here Is A Sample Letter To Remove A Board Member With Respect - iBabs

Here Is A Sample Letter To Remove A Board Member With Respect

With the honour of becoming a board member comes great privilege and responsibility. However, in some cases, board members may tarnish the reputation of a business with their actions, act unlawfully or simply not fulfil their obligations. In such cases, and in the absence of them volunteering to leave, you may want to remove a board member respectfully. 

Interestingly, PwC asked board members whether they believed that at least one member of the board that they’re on should be replaced and 40% of those asked said yes. So, it seems to be a fairly prevalent issue.

How do you remove a board member respectfully? Below, we’ll take a look at some of the options available and two sample letters to remove a board member.

How to remove a board member

If you need to remove a board member entirely, there are a few options to consider.

Removal by ordinary resolution    

An ordinary resolution is also referred to as the vote that gains the ‘simple’ majority of members — over 50%. So, if you have a majority of the board in agreement that this person should be removed, they can be removed. Of course, this should be in the bylaws of your organisation and the member’s contract to ensure this is a legal process. Unlike other ordinary resolutions, you cannot pass a written resolution when it comes to removing a director before the end of their planned term.

Retirement by rotation

Retirement by rotation is a process that some organisations use to ensure that there is strong corporate governance and encourage new leadership. In the UK, the Companies Act 2013 Section 152(6) (this section is only applicable to public companies) says that two-thirds of directors are liable to retire by rotation at every Annual General Meeting (AGM). Some private companies also adopt this in their bylaws. Generally, when this is done, the longest-serving members leave first.

Removal under the company's articles of association

When registering a company, you usually have ‘articles of association’ which are a set of written rules or a code of conduct for running the company. These articles are agreed upon by the shareholders, directors and company secretary and will include things like voting rights, how directors are compensated and rules on meetings. An organisation’s articles may make rules for their directors including causes for removal. In this case, a board member or director that is in breach of the articles can be removed from the leadership team. 

Disqualification by the court

In extreme cases of a member not meeting their legal obligations or engaging in unfit conduct, directors may be disqualified by the court. For example, not keeping proper accounting records, failure to send accounts and returns, not paying the tax due by the company or taking money from the company for personal benefit could lead to complaints or an investigation which may result in disqualification by the court.

Steps to follow when removing a board member 

When removing a board member, there are several steps you should take to stay respectful and on the right side of the law.

1. Assess the situation

First of all, assess the situation in full. Is this situation more suited to a verbal warning or a sit-down meeting to discuss? In cases of lawbreaking and failure to meet judiciary standards and obligations, it is unlikely that this will be the solution. But take an initial moment to assess the options available and collate any evidence that’s relevant and required.

2. Check the company’s articles of association and the shareholders’ agreement 

Normally, if there is a breach of judiciary duty or of the member’s obligations, this will be outlined in the articles of association, contract or shareholder’s agreement. Find the relevant breach of contract as this is required to request the removal or resignation of the director. You’ll also need to review any pay or remuneration outstanding - some boards pay settlement agreements - and get the wheels in motion for this. If the board member is a shareholder, a removal resolution is needed. 

3. Meet with the board member 

Once you have all the information you need, set up a meeting with the board member. Ideally, this would include just the chairperson, company secretary and board member. In extreme cases, a lawyer or attorney may need to be present for the meeting. 

4. Manage conflicts of interest

Conflicts of interest may include:

  • Conflict of duty
  • Conflict with a public sector organisation
  • Conflict with a private organisation
  • Potential and perceived conflicts.

If a conflict of interest has arisen, it’s important to manage this. For example, if the board member has failed to note a conflict of interest or failed to undertake their duties due to commitments to another board, you will need to ensure that all confidential information is safe and that appropriate NDAs (non-disclosure agreements) are in place.

5. Deal with claims against the board member 

Once your board member has stepped down permanently, temporarily or resigned entirely, it’s important to deal with any claims against the board member. These may come from an individual, an employee, shareholders or stakeholders. As there may be a lawsuit at play, the complaints can take time to resolve. 

Sample letters to remove a board member (templates)

If you find yourself in the delicate situation of needing to remove a board member with respect and legally, here are two sample letters to aid with the process.

When a board member isn’t meeting their obligations:

PRIVATE AND CONFIDENTIAL

Dear _______,

I am writing to you due to your recent lack of attendance and participation in meetings and votes for [Company]. You have missed XX regular meetings and have not responded to XX e-mail ballots in the last XX months. {Since it has been possible to attend these meetings, electronically this is an unacceptable level of participation for a board member.} We are having trouble achieving a quorum because of your lack of participation.

You have several options for how to proceed. These are:

  • Resign – this can be done with a simple email message to me.
  • Respond and make a case for why you have been absent and how you will be able to actively participate in the future.
  • Become a non-voting member – you can opt to have your voting status changed to [NVM or PSVM] by responding immediately. You will also need to submit the required documentation for a change of status without delay.

If you don’t do any of these things by [date], I will request that [company secretary] act at its next meeting to remove you from the roster for lack of participation.

Leaving the committee does not mean that you are unable to participate further. You can join any meeting as a guest and you can participate in the public reviews of the draft standard. I would strongly encourage you to do these things. I appreciate your past service but I think you can understand that in order for the committee to function, I must act to remove inactive members. I look forward to your decision. 

Best regards,

[Chairperson]

If a board member is unfit to serve on the board:

PRIVATE AND CONFIDENTIAL

Dear _______,

A hearing has been held to consider a number of concerns raised regarding your fitness or ability to discharge the functions of a member, consideration was given to [XX Concerns].

At the hearing to consider these issues, the [Corporation] Board were satisfied that you are [unfit/unable] to discharge the functions of a Member of the [Corporation], and that notice be given that you have been removed from office in accordance with Clause 10(2) of the Statutory Instrument of Government, this decision to take effect from [time] on [date of meeting].

I am very sorry that your membership has ended in this way; your contribution to the business of [Corporation] has been valued and your expertise is considered to be extremely useful during your collaboration with the board over the past few years.  

If you would like to appeal against the decision to terminate your membership, please write to the [Company secretary or chairperson of the [Corporation] board] within 10 working days, stating your reasons for your appeal. On receipt of your letter, a meeting will be convened to hear your appeal, according to the College’s appeals procedure.  

I would like to take this opportunity of thanking you for your association and contribution to the work of the [Corporation] board during your time as a member.

Best regards,

[Chairperson]

Alternatives to removing a board member 

Instead of removing a board member entirely, there may be a few alternative options to consider.

Term limits for board members 

To safeguard against potential issues with defiant or uncooperative board members, impose term limits from the get-go. 72% of boards have term limits for their members in place, and the most common limit is two consecutive terms of 3 years in length. Having term limits for all board members can help to reduce a lack of commitment over time and ensure that the board can be supported by new ideas and members fairly regularly. 

Discuss a leave of absence 

If a board member is facing what may be temporary or short-term circumstances such as a new job, you can discuss a leave of absence over a specified period of time. It might be that they can’t fulfil their obligations due to a lack of time at present, but may be able to in the future, so the issue may be handled in a different way, avoiding removal. This keeps their role open to return to, but generally means that there won’t be a replacement for them in the meantime.

Hold a personal intervention 

If you find that a particular board member is troublesome, you could have a personal intervention. This is generally a small meeting with the chairperson, the secretary and the member in question present. The board president can use this opportunity to find out what’s going on and if there’s anything behind the lack of commitment or fulfilment of obligations. Such an approach also gives an opportunity to the board member to step down voluntarily if they’d like to or recommit to their responsibilities.

FAQ

How do you write a petition to remove a board member?

A petition to remove a board member should include:

  • A greeting to the board and reason for writing your letter 
  • A list of the reasons with evidence as to why you think they should be removed
  • The form of action you are asking to be taken
  • A conclusion and statement of the identities of the petitioners
  • Signature spaces.

What if a board member owns shares in the company? 

If a board member owns shares in the company and has violated the company rules, the chairperson can put together a removal resolution based on the original shareholder agreement. This should cover what will happen to their shares owed in the event of involuntary or voluntary removal from the company.

Yes, you can remove a board member without their consent. Ideally, board members would step down voluntarily and resign, particularly in the event of a lawsuit or criminal charges such as fraud. But if they don’t, they can be removed from their position.

Can a board of directors remove a director?

Yes. A board of directors can vote to remove a director through a majority vote or ordinary resolution. While the board of directors cannot directly remove the director, the outcome of the vote can be used to start the process. The next step is for the chairperson and/or company secretary to notify the director of this and to give them the opportunity to appeal the decision.

Conclusion

Removing a director from a board can be difficult to navigate. However, with these sample letters, steps to take and FAQs, we hope we’ve answered all of your questions to make this process a little easier. And, make sure to learn from this experience if you have struggled - keep your bylaws up-to-date, add rotation rules and term limits to make the process of removing a board member even simpler in the future.

References and further reading

More information

Date:
7 February 2022
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