SECTION 3: NOMINATION AND APPOINTMENT PROCESS

60 | Nominating Committee Guide • Legal procedures to be performed by the company (for example, lodgement of a prescribed notice of the director’s vacation of office) when the resignation is considered effective. • Outgoing director’s duties after resignation (for example, taking necessary steps to notify the Registrar of his resignation in the event the ex-director has reasonable grounds to believe that the company will not lodge a return 44 ). • Notice period to serve after the resignation. A period of three months is recommended to enable the NC and the Board to find a suitable replacement. This is especially important if the resignation results in the company being unable to meet requirements for composition of the Board and Board Committees. • Method and scope of announcement to be made. It is preferable that the reasons for resignation be made as transparent as possible. The lack of sufficient disclosure may be interpreted as a cause for concern. • The right of the Board to seek legal advice on the disclosure of reasons for the resignation of the director. This is especially pertinent if the reasons implicate or involve the conduct of fellow directors and confidentiality of company information. 3.10.3 Another situation which calls for the replacement of a director arises when he is deemed incompetent or ineffective by the Board. Based on periodic performance evaluations of individual directors, the NC should assess if a director is able to contribute effectively to the Board. Where a director is ineffective or where new competencies are needed, the Board may wish to replace a director before the end of his term (if there is a maximum term limit). The challenge arises when there is no term limit under the company’s constitution. Where a director of a public company refuses to voluntarily step down from a Board, the other directors of the company cannot force him to do so by resolution or notice regardless of what the company’s constitution may state 45 . In such a situation, the 44 Section 173E(2) of the Companies Act. 45 Section 152(8) of the Companies Act. 3B-4 3B-6 3B-5