How to resign as a company director

Resigning as a company director entails more than just giving notice; there are certain additional considerations for both the director and the company. Read this guide for more information.

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What issues should a director consider before resigning?

If a company director also holds shares in the company, they may be required to sell their shares under the rules contained in the Articles of Association. If this is the case, there may be specific provisions on how they can offer their shares for sale contained in the Articles of Association or a Shareholders agreement.

Any directors loans - either made from the director to the company or vice versa - should to be settled prior to departure.

How does a company director resign?

Directors should first check the terms of their service agreement/Senior employment contract to find out if there is any specified contractual procedure and set notice period for resigning. In the absence of a contractual provision, there may be requirements contained in the Articles of Association.

Notice of resignation should generally be given in writing - and, in case of a dispute, it may be worth sending this by recorded delivery to the company's registered office, to provide evidence of the resignation.

What does the company need to do after a director resigns?

Limited companies are required to inform Companies House about any resignations of company directors or new appointments. This must be done within 14 days of the date they left office - either using Form TM01 or online. The company should also update its own register of directors - and the resignation should be recorded in the minutes of the next board meeting.

If the director resigning is the sole individual director, then a replacement is required in line with the Companies Act 2006 - failing which the company can be struck off by Companies House. PLCs must have at least two directors at all times.

Can company directors who have resigned still be held liable?

Company directors can still be held liable for issues which arose during their tenure. If a company goes insolvent, liquidators, administrators and administrative receivers are required to produce a report on the conduct of all company directors during the previous three years (irrespective of whether they have since resigned or not). This can potentially lead to a Director Disqualification Order made by the courts.

Directors who continue to exert influence over the board of directors after their resignation, may be considered to be 'de facto directors' - in which case they will be treated in law as current directors and can therefore continue to be held liable.

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