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June 17th 2014 / BY: Wisteria

What is Retirement by Rotation?

Retirement by rotation is a process whereby at each Annual General Meeting (AGM) one third of the directors must retire from their position and seek re-election as a director.

The Model Articles for public limited companies provides for retirement by rotation and often public companies include such a provision within their Articles as frequent re-election of directors is best practice according to the UK Corporate Governance Code.

However, it is not a statutory requirement for directors to retire by rotation and often for private entities such as small private limited companies it makes little sense for the directors to retire if the business is owner-managed. According to the Model Articles for PLCs a director is not automatically reappointed if shareholders take no action to reappoint them, which is a change from the previous Table A provisions.

Retirement by rotation for private limited companies

Private limited companies are no longer required to hold an AGM and if they have chosen not to hold one any provisions to the contrary within the company’s Articles of Association should be removed. For public limited companies using the Model Articles, all directors must retire at the first AGM and be re-elected by the shareholders.

At subsequent AGMs those directors who have been appointed by the existing directors since the last AGM and those who were not appointed or reappointed at the last two AGMs are required to retire by rotation.

Retirement by rotation enquiries

If you are unsure about how rules relating to retirement by rotation are relevant to your company or you would like assistance administering your Annual General Meeting please contact us on 020 8429 9245 or email us at info@wisteria.co.uk.