FLK1 · Multiple-choice practice

FLK1 Business Law — Question 25

Question

DEF Ltd is a mid-sized private limited company with multiple directors and shareholders. One of the directors, Lisa, has been absent from board meetings and has not actively participated in the company’s affairs for several months. The other directors are concerned about the impact of Lisa’s absence on the company’s operations. Which of the following actions can be taken to address the situation?

The other directors should wait for Lisa to resume her duties and take necessary actions in the meantime.
The other directors can appoint a new director to replace Lisa without her consent.
The shareholders can pass a resolution to remove Lisa as a director.
The shareholders can discuss the matter with Lisa and encourage her to take a leave of absence.
The other directors can hire a consultant to fulfil Lisa’s responsibilities until she returns.

Answer and explanation

Correct answer: C. The shareholders can pass a resolution to remove Lisa as a director.

Directors of a private limited company have a fiduciary duty to act in the best interests of the company and actively participate in its affairs. Lisa’s prolonged absence from board meetings and lack of involvement in the company’s operations may raise concerns about her ability to fulfil her duties as a director. Under the Companies Act 2006, s.168, in England and Wales, directors can be removed from office through an ordinary resolution passed by the company’s shareholders. If the other directors believe that Lisa’s prolonged absence is affecting the company’s operations and is not in the best interests of the company, they can propose a resolution to remove her as a director.

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