How The Mental Health (Discrimination) Act 2013 Amended The Removal Of Directors On The Basis Of Lacking Capacity

A director lacking capacity can be removed by the written opinion of a medical practitioner concluding that the director will be mentally incapable of acting for more than three months, if the company is governed by the Companies Act 2006. The steps for removing a director are explained in greater detail in our blog here Considerations after incapacity for business owners.

The grounds for the removal of a director based on incapacity detailed in the 2008 Model Articles were amended with the introduction of the Mental Health (Discrimination) Act 2013.

Under the Companies (Model Articles) Regulations 2008, article 18(e) provides for the automatic termination of a director’s appointment, if that director’s rights or powers were restricted by a court order on mental health grounds. The 2013 Act amended the 2008 Model Articles to revoke article 18(e) and remove the ground for terminating a director’s appointment based upon a court order. This applied to the model articles for private companies limited by shares, private companies limited by guarantee and public companies.

This means that the only ground for removing a director based on incapacity is now under article 18(d) of the 2008 Model Articles which requires that a registered medical practitioner, who is treating that person, gives a written opinion to the company stating that the person has become physically or mentally incapable of acting as a director and may remain so for more than three months .

If your company adopted the 2008 Model Articles and was incorporated prior to 28 April 2013, the date when the Mental Health (Discrimination) Act 2013 came into force, care must be taken to ensure that your company articles are aligned with the latest statutory provisions on this point. Article 18(e) is not automatically removed from your company articles so continuing to rely on the court order ground under article18(e) may be challenged by the affected director and deemed discriminatory. A company wishing to remove revoked article 18(e) can do so in the usual way by passing of a special resolution by the shareholders.

One must bear in mind that it is always open to a company’s shareholders to terminate a director’s appointment under section 168 of the Companies Act 2006, which is explored more in our blog How can shareholders remove directors? Section 168 gives this statutory right for the removal of directors by shareholders, which cannot be overridden by provision under the company’s articles, the shareholders agreement or the directors’ service contracts.