Removing a director in Australia, who has the power and how it works

"Can directors remove other directors?" is one of the most common questions we hear from company owners and founders, and the honest answer is more complicated than most people expect. A director's position is not controlled by whoever happens to be in the room on a given day. It is controlled by the Corporations Act 2001 (Cth) and by the company's own governing documents, and getting the process wrong can turn an internal decision into a shareholder dispute, an oppression claim, or a costly cleanup with ASIC.

For most small Australian businesses, the power to remove a director sits with the members, not the board. Proprietary companies have a statutory pathway in s 203C of the Corporations Act, and public companies have a more formal one in s 203D. The board itself generally has no power to remove one of its own members, and for public companies any attempt by the board is void. This article walks through who holds the power, how the statutory machinery operates, the practical steps involved, and the traps that turn clean removals into disputes.

Who holds the power to remove a director

Four groups interact in any removal, and each has a distinct role:

Members (shareholders): the main power-holders under the Corporations Act. For proprietary companies, s 203C lets the members remove a director by resolution. For public companies, s 203D makes a members' resolution effective despite anything in the constitution or any agreement with the director.
The board of directors: has no general statutory power to remove a fellow director. For public companies, s 203E makes any board resolution, request or notice to remove a director void. For proprietary companies, the board can only remove a director if the constitution grants that power.
The company's documents: the constitution and any shareholders agreement set the extra rules, such as notice periods, voting thresholds and automatic cessation events.
ASIC: the regulator that maintains the public register. The company must lodge notice with ASIC within 28 days of a director leaving office under s 205B.
The director themselves: can resign by written notice to the company under s 203A, and in a public company has statutory rights to contest a removal.

That division of power is the whole story in miniature: members remove, boards usually cannot, ASIC records, and the documents fill in the gaps.

Removal by members' resolution: the statutory pathway

For most companies, removal is a members' decision, but the mechanics differ sharply between proprietary and public companies.

Proprietary companies: section 203C

Under s 203C of the Corporations Act 2001 (Cth), a proprietary company may by resolution remove a director from office. That is an ordinary resolution, meaning a majority of the votes cast by members entitled to vote on it.

The detail most owners miss is that s 203C is a replaceable rule. Under s 135, a replaceable rule applies automatically unless the constitution displaces or modifies it. So if your constitution is silent, the members have the statutory power. If your constitution says removal requires a special resolution, a supermajority, or a particular notice period, those extra requirements bind the process, and a resolution that ignores them can be challenged.

Public companies: section 203D and the notice of intention

For public companies, s 203D gives members the same basic power, but with significantly more formality:

The removal resolution is effective despite anything in the constitution, in any agreement between the company and the director, or in any agreement between members and the director.
Notice of intention to move the resolution must be given to the company at least 2 months before the meeting. If the company calls the meeting after receiving that notice, the resolution may be passed even if the meeting is held less than 2 months later.
The company must give the director a copy of the notice as soon as practicable, and the director is entitled to put their case to members. They can provide a written statement of up to 1,000 words for circulation to members, provided it is not defamatory, and they can speak to the motion at the meeting.
The meeting itself needs at least 21 days notice under s 249H, and shorter notice is not available for a removal resolution under s 249H(3).
If the director was appointed to represent particular shareholders or debenture holders, the removal does not take effect until a replacement representing those interests has been appointed.

This is where the formalities catch people out. Missing the 2-month notice of intention, or letting the meeting run on short notice, can make the whole removal invalid.

Why the board usually cannot remove a director

The instinct to "vote them out at board level" is understandable but usually wrong.

For public companies the position is absolute. Under s 203E, any resolution, request or notice of any or all of the directors is void to the extent it purports to remove a director or require them to vacate office. The board of a public company simply cannot remove one of its own members.

For proprietary companies there is no statutory board power at all. A board can remove a director only if the constitution grants that power, for example by allowing the board to remove a director it appointed, or to remove a director on specified grounds such as prolonged absence or incapacity. If the constitution is silent, the board has no removal power, no matter how united the other directors are.

There is one genuine board power, but it is narrower than it looks. Under s 203F, the directors may revoke or vary the appointment of a managing director. That removes the person from the managing director office, not from the board. Unless the constitution says otherwise, they remain a director, with all the powers and information rights that come with the role.

Resignation and automatic cessation

Not every departure involves a resolution. Two other mechanisms end a directorship without any vote.

First, resignation. Under s 203A, a director may resign by giving written notice to the company at its registered office. Resignation is often the cleanest route when the relationship can be negotiated, because it avoids a contested meeting and gives both sides control over the announcement.

Second, automatic cessation. Under s 203B, a person ceases to be a director if they become disqualified from managing corporations under Part 2D.6, unless ASIC or a court allows them to continue. The main automatic disqualifiers under s 206B are an undischarged bankruptcy, a personal insolvency agreement, and certain criminal convictions, which carry a five-year disqualification.

Constitutions and shareholders agreements commonly add their own automatic cessation events: resignation from employment for an executive director, losing a minimum shareholding, or a defined "bad leaver" event. These are contractual events, so they only operate if the documents actually say so.

What the constitution and shareholders agreement actually control

The statutory provisions are the floor, not the ceiling. The real-world removal pathway is usually set by the company's documents.

Because s 203C is a replaceable rule, a proprietary company's constitution can displace it entirely or add requirements. A constitution might require a special resolution, a supermajority, longer notice, or a defined procedure before a director can be removed. It can also grant the board a removal power that the Act does not provide.

A shareholders agreement operates differently. It is a contract between the members, and it binds them even where the Act would allow removal. It might require both co-founders to consent before either can be removed, or provide a buy-out mechanism on removal, often called a bad leaver clause. For public companies, a shareholders agreement cannot override s 203D, because the Act says the members' resolution is effective despite any agreement. But breaching the agreement can still produce its own claims.

This is the point to remember: the constitution and shareholders agreement decide the practical pathway, which is why they matter enormously if the relationship later breaks down.

The removal process step by step

Assuming the members do have the power, the process runs through six stages:

Check the documents: Read the constitution, the shareholders agreement and any director service agreement. Confirm who holds the removal power, what notice is required and what threshold applies.
Choose the path: Members' resolution, board resolution (only if the constitution allows), automatic cessation event, or negotiated resignation.
Give the right notice: Members' meetings generally need at least 21 days notice under s 249H, and the constitution may require longer. For a public company removal, the notice of intention under s 203D must reach the company at least 2 months before the meeting, and short notice is not available.
Hold the meeting properly: Ensure quorum is met under the constitution and the Act, count the votes correctly, and record the resolution in minutes. Minutes are often the first documents examined in a later dispute.
Lodge with ASIC: Under s 205B, the company must lodge notice within 28 days of a director ceasing office, usually on Form 484. Late lodgement attracts late fees, and a resigning director can also lodge Form 370 themselves.
Manage the practical consequences: Remove banking and accounting access, change passwords and admin rights for email, domains and social accounts, update signatory authorities, and confirm who owns the company's intellectual property.

Where removals go wrong

The common failure patterns are worth knowing before they happen to you:

Fifty-fifty deadlock: Two co-founders with equal shareholdings can deadlock any removal: neither can pass an ordinary resolution against the other. The resolution is not a tool here. The realistic paths are negotiation, a buy-out, or the deadlock and exit mechanisms in a shareholders agreement.
The director who is also an employee: Removing someone as a director does not end their employment. The employment relationship must be managed separately, through its own process and entitlements, and mixing the two up creates confusion about pay, duties and authority.
Informal decisions: A "decision" that everyone agrees on at a coffee meeting removes no one. If the formal process is skipped, the person remains a director, their acts remain valid, and the ASIC register stays wrong.
Invalid process invites challenge: A removal that ignores the constitution's requirements can be challenged. Under s 232, a member can ask the court for relief where conduct is oppressive, unfairly prejudicial or unfairly discriminatory, and a removal that rides roughshod over the company's own rules is a plausible target.
Contract claims survive removal: For public companies, a valid removal is effective despite a service agreement, but the director can still sue for damages, for example for notice pay under the contract.
Class representative directors: In a public company, removing a director appointed to represent particular shareholders or debenture holders does not take effect until a replacement is appointed.

When a lawyer should be involved

There are three points in the lifecycle where professional advice earns its keep:

Before the relationship breaks down: The documents decide the pathway, so this is where the leverage is. A tailored constitution and shareholders agreement can give the board removal powers, set workable thresholds, and provide deadlock and buy-out mechanisms before anyone needs them.
When removal is being considered: A lawyer can confirm whether the power exists, map the correct process including the s 203D notice requirements, and run the meeting so the resolution is unimpeachable. Where possible, they can also negotiate a clean exit, combining a resignation with a settlement and share transfer.
After the decision: The 28-day ASIC clock, the practical access issues, and the exposure to oppression or contract claims all need attention. A lawyer can handle the lodgements, the handover, and the assessment of what the removed director could argue.

The power was decided when the company was set up

The honest answer to "can directors remove other directors?" is that the board usually cannot, the members usually can, and the constitution and shareholders agreement decide the details. The leverage in any removal dispute was largely set the day the company was incorporated and its documents were drafted.

The statutory clock does not wait for the relationship to heal. The 2-month notice of intention and the 28-day ASIC lodgement run whether or not the parties are talking. If your documents are silent or out of date, reviewing them now, before a removal is on the table, is dramatically cheaper than litigating a failed removal later. A short conversation with a commercial lawyer can confirm where the power sits in your company and what the process would look like.