ALL companies are to have a board of directors to provide guidance to, and oversight of, the company. In Jamaica a private company is required to have at least one director. On the other hand, a public company is to have at least three directors, at least two of whom are not employees of the company or its affiliates. Changing those who hold the reins of the company, whether by appointment, removal, or both, is to be done in accordance with the Articles of Incorporation of the company and the Companies Act.

Directors can be appointed by existing directors or shareholders. Directors can be removed (i) by the director resigning, (ii) by retiring and not being re-elected, (iii) by the shareholders at a general meeting, or (iv) by disqualification by the court.

Appointments of New Directors

At a general meeting of the company, directors can be appointed by shareholders by the passing of an ordinary resolution which requires simple majority. Provided the Articles of Incorporation of a company allow it, directors also have the general power to appoint new directors to increase the number of directors or to fill a casual vacancy. The directors exercise this power at their meetings of directors.

Resignation

A director can resign from his office as director, and this is generally done in writing. For good measure, where applicable, the company should ensure the resignation letter includes language which states that the director has no claim outstanding against the company and/or its officers in respect of any cause, controversy, matter, or thing arising out of or connected to being a director or from the resignation.

Removal by Shareholders

The shareholders at a general meeting of the company can remove a director by passing an ordinary resolution. However, special notice of at least 28 days is required to pass the resolution to remove the director or to appoint another person to replace that director at the meeting the director is to be removed. The company, upon receiving such notice of an intention to remove a director from a shareholder, shall immediately send a copy of the notice to the affected director. The affected director has a right to be heard on the topic of his removal at the general meeting. If the affected director opts to make written representations prior to the meeting, the company is to circulate it to the shareholders. If not circulated, then the affected director can request that it be read in the general meeting. If the director is successfully removed and no replacement appointed at that meeting, a casual vacancy is created.

Disqualification by the Court

A shareholder, director or trustee of a company may make a complaint to the Registrar of Companies that a person is unfit to be concerned in the management of a company. The Registrar of Companies will investigate the matter and if satisfied that there are sufficient grounds for hearing the matter, itself make an application to the court or issue a certificate to the complainant to make an application to the court. After hearing the matter, the court may order that an individual may not be a director of the company, or in any way, directly or indirectly, be concerned with the management of the company, usually for a particular period, not exceeding 5 years. Factors the court will consider include any misfeasance or breach of any fiduciary or other duty of the director in relation to the company and the extent of the director’s responsibility for any failure by the company to comply with the provisions of the Companies Act in relation to the keeping and maintenance of accounting records.

Changes at the Annual General Meeting

The model Articles of Incorporation for a company limited by shares included in the Companies Act (which most companies adopt) sets out provisions in relation to the change of directors at an annual general meeting (AGM). The articles would state when and in what order directors are to retire and whether retiring directors are eligible for re-election. The model articles also state that “No person other than a director retiring at the meeting shall unless recommended by the directors be eligible for election to the office of director at any general meeting unless not less than three nor more than twenty-one days before the date appointed for the meeting there shall have been left at the registered office of the company notice in writing, signed by a member duly qualified to attend and vote at the meeting for which such notice is given, of his intention to propose such person for election, and also notice in writing signed by that person of his willingness to be elected.” Therefore, unless notice has been given to the company of a shareholder’s intention to appoint a new director other than those stated in the notice for the AGM, no such resolution should be put to a vote unless an existing director recommends this to the shareholders. In any event as a matter of good governance, if a director wishes to recommend a new director, the board should consider including such recommendation in the notice prior to the AGM.

Once there have been changes to the board, the company is to file with the Companies Office of Jamaica a Notice of Appointment/Change of Directors within 14 days of the change. Failure to do this will incur a late fee.

Changing the reins of a company requires both the directors and shareholders to be aware of all the procedural requirements to effect the changes, and to protect the company and/or a shareholder (including the appointment/removal) from being challenged for breaches of the Companies Act. If you are letting go or taking over the reins of a company, it is important that the change is done in accordance with the law.

Shaniel May Brown is an Associate at Myers, Fletcher & Gordon and is a member of the firm’s Commercial Department. Shaniel may be contacted via shaniel.maybrown@mfg.com.jm or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.