Dismissal of the director without the consent of the founders (participants)

In Ukraine, there are many legal entities that do not conduct economic activity and, accordingly, do not charge a salary to the director, who remains the only employee. The procedure for liquidation of such enterprises is quite complicated, so the owners are in no hurry to close them. Often, the owners simply lose interest in business, go abroad, or ignore issues related to the activities of such companies.

The directors of such companies actually “hang” in the USR, nobody can solve the issue of their dismissal. There are also situations when conflicts arise between company members, due to which it is impossible to gather the necessary number of votes to dismiss the director, or the members simply ignore his statements.

The director of the enterprise (business partnership) actually has a dual status: on the one hand, he is an employee subject to the labor legislation, and on the other hand, he is a sole executive body of the enterprise or part of its collegial executive body.

However, a company cannot exist without a manager, and even more so – without an executive body, so the dismissal of a director can actually take place by terminating his powers as an executive body, i.e. simultaneously with the appointment of a new manager (or a person who will perform his functions before the appointment of such a manager ).

At the same time, the powers of the director can be terminated only by the Higher Management Body or a single participant.

Current legislation prohibits forced labor and provides for the possibility of dismissal of a person at his own will. On the other hand, corporate law requires a decision of the company’s highest management body to terminate the powers of the executive body.

What to do in case of inactivity of the higher management body?

Again, the Constitution of Ukraine comes to the rescue: the second part of Article 8 guarantees the right to go to court to protect the constitutional rights and freedoms of citizens.

Ukrainian courts have developed a positive practice for managers who find themselves in a similar situation.

Algorithm of actions for terminating the authority of the manager without the consent of the participants:

1. Write a resignation letter and send it to the company’s legal address or arrange for field delivery if appropriate. A copy of the specified application should also be sent to the registration addresses of the company’s members.

2. Draw up a demand for convening a meeting of the higher management body at the initiative of the executive body regarding the director’s dismissal and send it to the company’s participants’ registration addresses.

3. Appear at the meeting and record the fact that the meeting did not take place by drawing up a protocol in case of insufficient quorum to make a decision on the termination of the powers of the director or an act on the non-appearance of participants. In case of non-appearance of the participants, it is advisable to attract witnesses to record this event.

4. Prepare a statement of claim and submit it to the court. At this stage, you should correctly choose the method of protection of violated rights and determine the claims accordingly. It is important that the lawsuit contains requirements of a mandatory nature, because after receiving a positive court decision, it will have to be fulfilled.

We recommend using the following requirements:

1. terminate the powers of the director;
2. exclude information about the plaintiff as a manager from the register of legal entities;
3. determine the appropriate participant by the head of the company (as an option, the one with the largest percentage of votes in the company). Because in the process of fulfilling the second requirement, the registrar cannot leave the section of information about the head of the company unfilled.

5. Obtain a positive court decision and submit it to the state registrar for appropriate registration actions.

Of course, the implementation of this algorithm, at first glance, may seem like a simple and ordinary process, but in practice, at each of the specified stages, various legal nuances arise, the solution of which requires professional legal support. Therefore, it will be advisable to contact a professional lawyer who will help to carry out the dismissal of the director and avoid misunderstandings and mistakes during the mentioned procedure and direct defense in court.