Case Background & Strategy

The Companies Act 2016 contains no general power to suspend a director from office. A suspension is only lawful if it is grounded in the company’s constitution, a shareholders’ resolution contemplated by the constitution, or — in the case of an executive director — the terms of their service contract. Purported suspensions without such a basis are routinely challenged and set aside.

Suspension of the office versus the employment

It is essential to separate the directorship (a corporate office) from any executive employment. An executive director can usually be suspended as an employee pending a domestic inquiry under ordinary employment-law principles, but that does not by itself suspend their rights as a director — to notice of board meetings, to attend and vote, and to inspect company records. Conflating the two is the most common error in boardroom disputes.

When suspension is used

Suspension typically arises pending investigation into alleged misconduct, during removal proceedings, or amid shareholder factional disputes. Because an invalid suspension can amount to oppression of a director-shareholder, or repudiation of an executive’s service contract, the corporate, employment and litigation strands must be sequenced together.

Challenging a suspension

An affected director may seek declarations and injunctions to restrain exclusion from board processes, and a director-shareholder may rely on section 346 oppression where exclusion from management breaches a legitimate expectation of participation — common in quasi-partnership companies.

Frequently asked questions

Can directors suspend a fellow director by board resolution?

Only if the constitution confers that power. Absent such a provision, the board cannot strip a director of the incidents of office.

Does suspension stop directors’ fees?

That depends on the constitution and any service contract; unilateral withholding without contractual basis invites claims.

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