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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. For more information, read Compulsory transfer of shares.

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

How does a company director resign?

Directors should first check the terms of their service agreement, Senior employment contract or Letter of appointment 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. In case of a dispute, it may be worth sending such notice 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 certain company changes. These include the resignation of company directors. A company must do this within 14 days of the date the director left the office - either using Form TM01 or online. The company should also: 

  • update its own register of directors

  • update its register of directors’ residential addresses

  • update its register of shareholders (where the director was a shareholder and sold their shares in the company)

  • record the resignation in writing 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. Failure to do this can result in the company being struck off the registered by Companies House. PLCs must have at least 2 directors at all times. For more information on appointing a new director, read Appointing and removing directors.

Can company directors who have resigned still be held liable for their actions as directors?

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 3 years (irrespective of whether they have since resigned or not). This can potentially lead to a Director Disqualification Order made by the courts. For more information, read Misfeasance and insolvency and Disqualification of company directors.

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

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