ACCA Applied Skills · Corporate and Business Law (Global) · Company meetings and resolutions
Members of Evra Ltd validly pass an ordinary resolution removing director Ms Faro, who has a five-year service contract with 3 years remaining. Which statement is correct?
The removal is valid, and Ms Faro leaves office immediately. However, removal does not extinguish her contract rights, so she may be able to sue the company for damages for breach of her service contract covering the remaining three years.
- AThe removal is invalid because her contract has not expired
- BThe removal is valid, and she may be able to claim damages for breach of her service contractCorrect
- CThe removal is valid, and she is entitled to remain until the contract ends
- DThe removal is valid only if the resolution was passed unanimously
Explanation
Statutory removal takes effect irrespective of any agreement between the company and the director. The removal ends her office, but it does not remove her contractual rights, so she may claim damages for breach of the service contract. Option three is wrong, since she must leave office immediately.
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