Does your company have an underperforming board? Here’s how to get rid of them: An s.249D notice!

Has your company got an underperforming board running your company and want to replace them? It’s possible and easy in theory, although difficult in practice.

Stocks Down Under recaps how you can remove underperforming board members.

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How to remove an underperforming board

Simply put, shareholders wanting to remove an underperforming board (or individual directors) need to vote either at an AGM (Annual General Meeting) or an EGM (Extraordinary General Meeting).

Directors need to be re-elected by shareholders at AGMs, although their terms vary. This might be the perfect time to remove an underperforming board. If you can’t wait for your company’s AGM, this can be done at an EGM. To hold an EGM, a company needs to be compelled by a so-called s.249D notice.

What is an s.249D notice?

An s.249D notice is so-called after the applicable section in the Corporations Act 2001. It compels the directors of a company to call and arrange a general meeting on request of shareholders with at least 5% of votes.

Up until 2014, it was possible for 100 members to do so irrespective of the company. This loophole was abolished because it was realised that this would be a significantly small number in respect of large companies.

How can shareholders issue an s.249D notice?

The request has to be in writing, include the applicable resolution, be signed by all members making the request and be given to the company. Directors must call the meeting within 21 says after the request is given and the meeting must be held no later than 2 months afterwards.

To be clear, this mechanism can be used for occasions other than when shareholders want to remove underperforming board members. Although it is not a requirement under the act, shareholders seeking to remove an underperforming board or individual members should have replacements in mind. This is especially the case in respect of smaller companies with smaller boards.

This is because they may be vulnerable to being suspended from trade for having less than the required number of directors (3 under the Corporations Act and ASX Listing Rules).

Countering the company

Although the company will have to call an EGM and outline to shareholders that some want to remove members of the board, they will outline their case as to why the directors should not be removed. Reasons may include that new board members will control too much of the company, the number of directors won’t be right with the company and the need for stability.

The company may try and rebut some of the specific reasons why shareholders want to remove the board members. Existing board members will put this case to shareholders again at the meeting so it is important to have your own counter-arguments ready.

Recent case studies show it is not easy

In reality, things are not so easy as companies will try and block things and sometimes the meetings may not go ahead as regulators (especially the Takeovers Panel) may declare unacceptable circumstances, for instance if associations of the requisitioning shareholders are disclosed. And things can go slowly.

Case studies where this happened in the last 2 years include Emu (ASX:EMU), Sequoia (ASX:SEQ), Vintage Energy (ASX:VEN) and Vmoto (ASX:VMT). What happened at Winchester Energy (ASX:WEL) bears special mention. Winchester’s board received s.249D notices and held a meeting.

But even though the directors they wanted removed were pushed out (Lloyd Flint and Ricardo Garzon Rangel), the requisitioning shareholders couldn’t get their nominee (Frances Lai) appointed and so the company was left short of the ASX’s minimum requirement of 3.

Things got so comical that when Rory McGoldrick resigned due to a lack of confidence, it was legally ineffective because there wouldn’t have been a single director at the company.

On 31 July 2025, Winchester appointed Jason Peterson and David Wheeler as non-executive directors. The company on that day also noted it was,’ seeking further advice regarding the previous notices under section 249D … and will take all necessary steps to ensure compliance’.

In August, Chris Zielinski was appointed to the board and Rory McGoldrick transitioned to part-time CEO. In November, Thomson Naude joined the board and Jason Peterson resigned from the board while committing to continue as a Corporate Advisor.

Confused by all of that? So are we, but we hope investors have understood our general point…that sometimes things can be messy and confusing.

Removing an underperforming board

Ultimately, it is difficult to remove an underperforming board given the requirement to get 5% of shareholders on your side. Unless of course, you are a shareholder with 5% of more.

If you disagree with the way a company is being run, it is far easier to just sell out of the company. But it is not impossible to stay and take action.