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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 director’s loans - either made from the director to the company or vice versa - should 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 (Companies House in Cardiff for companies registered in England and Wales, and Companies House in Edinburgh for companies registered in Scotland) about any resignations of company directors or new appointments. This must be done 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 - failing which the company can be struck off by Companies House. PLCs must have at least two 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?

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. For more information, read Misfeasance and insolvency.

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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