How To Remove A Director In New Zealand Under The Companies Act 1993

When you’re running a small business, directors aren’t just names on the Companies Register. They’re the people making the big decisions, signing contracts, managing risk, and guiding the company’s direction.

So if a director relationship breaks down (or a director simply isn’t doing their job), the question becomes practical and urgent: what’s the right legal process for removing a director in New Zealand?

The good news is that New Zealand company law does give shareholders a pathway to remove a director. The tricky part is doing it properly under the Companies Act 1993 (and your company’s own governance documents), without creating avoidable disputes or legal exposure.

This guide explains how the process typically works, what your options are, and the common traps small businesses run into. It’s general information only, and isn’t legal advice for your specific situation.

What Does “Removing A Director” Actually Mean?

In everyday business, people use “director” to describe a few different roles. Before you start the process of removing a director, it’s worth getting clear on what you’re trying to change.

Director vs Shareholder vs Employee

A person can be:

• A director (appointed to the board to help govern the company);
• A shareholder (an owner of shares in the company);
• An employee (on wages/salary, with an employment relationship); and/or
• A contractor (providing services under a contract).

These roles can overlap. For example, many founder-directors are also shareholders and employees.

This matters because removing someone as a director only removes them from the governance role. It does not automatically:

• take away their shares,
• cancel their employment, or
• end their right to be paid under another agreement.

To protect your business, you often need to manage multiple processes at once (for example, a director removal + share transfer + settlement documents). That’s where planning makes a big difference.

Removal vs Resignation

Sometimes the cleanest outcome is a voluntary resignation. If a director agrees to step down, that can be faster and less contentious than a formal removal process.

But if they won’t resign (or they’re unreachable), you may need to use the legal removal pathway under the Companies Act 1993 and your company’s governance documents.

What Does The Companies Act 1993 Say About Removing A Director?

New Zealand’s Companies Act 1993 sets out baseline rules for how companies are governed, including how directors are appointed and removed.

In simple terms, the Act allows shareholders to remove a director by passing a shareholder resolution at a meeting (subject to required notice and process). Your Company Constitution may also include additional requirements or alternative procedures, so you always need to check it first.

Why Process Matters (Even When You’re “Sure” You Want Them Gone)

In small businesses, director removals often happen in high-stress situations:

• a co-founder dispute,
• a breakdown in trust,
• serious underperformance,
• concerns about misconduct, or
• a deadlock where the company can’t move forward.

Even if the decision feels obvious, the process still needs to be legally valid. If you cut corners, you can end up with:

• an invalid removal (meaning the person is still legally a director),
• claims that shareholders were not treated fairly, or
• costly disputes that drain time, cash, and focus.

Doing it properly from day one is usually cheaper than “cleaning up” later.

Step-By-Step: How Removing A Director Typically Works In Practice

Every company is different, but this is the usual roadmap for removing a director in New Zealand.

1) Check Your Company’s Governance Documents First

Start with these documents:

• Your Company Constitution (if you have one);
• Your Shareholders Agreement (if you have one); and
• Any director appointment letter or Directors Service Agreement.

These documents often cover practical realities the Companies Act doesn’t spell out in detail, such as:

• who can appoint and remove directors,
• whether certain shareholders have “appointment rights”,
• deadlock resolution processes, and
• what happens to shares when a founder leaves.

If your constitution or shareholders agreement sets out a specific process, you generally need to follow it (as well as the Act).

2) Confirm Who Has The Power To Remove The Director

In most small companies, removal power sits with shareholders (not the other directors). That means you’ll need to consider:

• the company’s shareholding split,
• voting rights attached to different share classes (if any), and
• whether any shareholder approval thresholds apply.

If your company has two directors who each own 50%, the “legal” steps can be straightforward but the decision-making may be deadlocked. In that situation, it’s often less about the paperwork and more about negotiation and exit strategy.

3) Call A Shareholder Meeting And Give Proper Notice

Removing a director generally requires a shareholder resolution at a meeting, not just an informal email decision.

Key things to get right include:

• Notice of meeting (sent to the right people, within the right timeframe);
• The meeting agenda clearly stating the proposed resolution to remove the director;
• Voting procedure (including proxies if allowed/used); and
• Minutes properly recording the decision.

While some shareholder decisions can be made by written resolution, removal of a director is typically done by a resolution passed at a meeting, and the director is generally entitled to notice and an opportunity to be heard. For that reason, a properly convened meeting is usually the safest approach.

4) Give The Director A Fair Chance To Respond

Even when your company can legally vote to remove someone, fairness still matters.

Directors commonly have rights under the Companies Act 1993 (and sometimes under your constitution) to:

• be informed that a removal resolution is proposed, and
• make representations (for example, by speaking at the meeting or providing a written statement).

This is one of the biggest “risk areas” for small businesses. If the removal is handled in a way that looks procedurally unfair, it can escalate conflict and increase the chance of legal claims later.

5) Pass The Resolution And Record It Properly

If the shareholders vote in favour, you then need to ensure the resolution is:

• properly documented,
• signed (where required), and
• stored in the company records.

Depending on what else is happening at the same time, you may also need additional board or shareholder paperwork, such as documenting the appointment of a replacement director.

6) Update The Companies Office Register And Company Records

Once the director is removed (or resigns), the Companies Register needs to be updated. The company generally must notify the Registrar of the change within the required statutory timeframe (commonly 20 working days). You should also update your internal company records, including:

• director and shareholder registers (if applicable),
• bank signatories,
• authorised signers with suppliers and customers, and
• access to company systems and information.

It’s worth treating this as a security step as much as a compliance step-especially if the removal involves a dispute.

What If The Director Is Also A Shareholder (Or A Founder)?

In small businesses, the hardest director removals are usually founder situations. You might be able to remove someone as a director, but they can still remain an owner of the company if they keep their shares.

This is where many businesses get stuck: the company wants governance to move forward, but the ownership structure keeps dragging everyone back into conflict.

Consider Whether A Share Exit Is Needed

If the departing director is also a shareholder, you may need to negotiate a share transfer or buyout as part of the exit. That can involve:

• agreeing a valuation method,
• setting payment terms (including instalments in some cases), and
• documenting the transfer correctly.

It’s common for this to tie into a broader restructure or a change in control. If you’re doing anything beyond a simple transfer, it helps to understand the bigger picture of changing company ownership.

And if you’re at the stage of moving shares, the process for how to transfer shares should be handled carefully-mistakes here can create long-term problems with control, tax, and investor confidence.

Don’t Forget Confidentiality, IP, And Restraints

When a director leaves, it’s also a good time to confirm what happens with:

• company intellectual property (IP) and who owns what,
• confidential information,
• client relationships, and
• any restraint obligations (where enforceable).

Founders often have deep access to customer lists, pricing, supplier terms, and strategy. Even if you trust them, you should still formalise what they can and can’t do with company information going forward.

Common Risks And Mistakes When Removing A Director

Removing a director is often legally possible, but still commercially risky if handled the wrong way. Here are the big mistakes we see small businesses make.

Trying To “Vote Them Out” Without Checking The Paperwork

Some companies assume they can remove a director the same way they’d remove someone from a group chat: quick decision, quick update.

But if your constitution or shareholders agreement sets out specific steps (or special voting rights), ignoring them can make the process invalid-or at least much easier to challenge.

Not Separating “Governance” From “Employment”

If the director is also an employee (for example, a general manager on payroll), removing them as a director doesn’t automatically terminate their employment.

Employment termination has its own legal rules and procedural fairness requirements, and you’ll often need to check the separate Employment Contract and follow a proper process.

This is a common trap for growing businesses where founders wear multiple hats.

Leaving The Company Exposed During The Transition

When relationships deteriorate, time matters. In the gap between “decision made” and “paperwork finalised”, businesses can be exposed to:

• unauthorised spending,
• data being copied or deleted,
• messages being sent to customers/suppliers, and
• contracts being signed without internal agreement.

It’s important to plan the timing so you can update access, bank authorities, and internal controls quickly once the change takes effect.

Not Documenting The “Peace Deal”

Even if you successfully remove a director, you may still need to wrap up the relationship cleanly.

For example, you might negotiate repayment of director loans, return of company property, confidentiality obligations, and non-disparagement commitments. These outcomes are commonly documented in a Deed of Settlement, which helps prevent the dispute from reigniting later.

Key Takeaways

• Removing a director in New Zealand is usually done through a shareholder process under the Companies Act 1993, and you must also check your constitution and any shareholders agreement.
• Removing someone as a director doesn’t automatically remove them as a shareholder or end any separate employment/contract arrangements they have with the business.
• Getting the process right matters-proper notice, a valid resolution passed at a meeting, and clean records can reduce the risk of disputes or invalid decisions.
• If the director is also a founder/shareholder, you may need a broader exit plan, including share transfer terms and settlement documentation.
• It’s worth getting legal advice early, especially where there’s deadlock, allegations of misconduct, or significant company value at stake.

If you’d like help removing a director, updating your company governance documents, or negotiating a clean founder exit, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.