Removing a member of the board of directors
Boards of NPCs often find themselves in a position where, for one reason or another, they would like to remove one of their number from the Board.
If the MOI of the NPC stipulates terms of office for directors (and if those terms of office are usually observed) then the easiest route may be to wait it out, and simply not re-elect that director when their term ends.
If this is not an option or too far away to endure, and if some gentle persuading to resign bears no fruit, then the Companies Act does provide ways to remove a director, but there are some processes which must be strictly followed, for the removal to be legal and accepted by CIPC. Please note that these requirements are mandatory so, even if your MOI says ‘the board may remove a director who has not attended three meetings', the provisions of the Companies Act override the MOI and must be adhered to.
For an NPC which has members:
Section 71 provides that, even if the MOI says otherwise, the members have the right to remove a director by ordinary resolution of members taken at a meeting of members provided that:
a) the director must be given adequate notice of the meeting and resolution; and
b) the director (or their representative) must be allowed to present their case to the meeting, before a vote is taken.
Additionally, in an NPC with members, the directors themselves may remove one of their number by resolution if the director:
- is ineligible or disqualified to be a director, on any ground set out in the Act;
- is incapacitated and unable to perform their duties now or within a reasonable time; or
- has neglected or been derelict in the performance of their duties.
Once again, the proper process must be followed of:
a) giving notice, adequate time to respond and details of the reasons for proposed removal;
b) a reasonable opportunity to make their case at a meeting of directors.
The process for both sorts of removals is the same, but the directors may only remove for one of the reasons listed, whereas the members could just vote to remove a director who they determined to no longer be a good ‘fit’ or to be creating some sort of unhappiness at board level, for instance.
For an NPC with no members:
The route available to the directors to remove for good reason in terms of section 71(3) and (4) is certainly available. The question is whether, there being no members, the ‘no fault’ removal by members in section 71(1) and (2) is still available, but to the directors.
In Schedule 1 to the Companies Act, 5(2) provides that:
‘If a non-profit company has no members, the Memorandum of Incorporation must set out the basis on which directors are to be appointed by its board, or other persons.’
In our view, the power to appoint directors (which would, in a with-members NPC lie with members) must include the power to dismiss directors. The MOI of a no-member NPC will specify who (or what body) has the power to appoint and that person/persons/body will also have the power to remove, in the same way, that members may remove.
Therefore, in a no-members NPC which empowers directors themselves to appoint new directors, the directors must also be able to follow the ‘no-fault’ removal process available to members. Whichever reasons are given for removal, however, the proper process of notice, time to prepare and an actual meeting held with the opportunity to respond, must be followed in all cases.