How to Resign as a Director

Resigning as a company director is a big decision and can feel daunting. Whether you want to take on new opportunities or are experiencing ongoing conflicts with the business, understanding the relevant laws and procedures is essential. 

When a director leaves a company, both parties must take various steps to ensure a smooth transition and minimise future risk. At helix law we specialise in litigation, and in advising where something has gone wrong. Often, though not always, a resignation might be contemplated where there are broader issues involved- perhaps false promises- concern about other conduct- or where things have not played out as you were expecting. Resignation might be appropriate in this context, but there might be other factors in play and in this context before taking any steps such as resignation, you should obtain specialist advice. 

This article explains common reasons for resignations, the procedure, and the impact on liability. For advice, contact Helix Law. 

Can I Just Resign as a Director?

Generally, a director can leave a company at any time. However, it’s often not as simple as handing a notice to your colleagues and departing the next day. The Articles of Association, which govern how the business is run, usually set out specific procedures for termination. 

The company might also have other documents or agreements which dictate how and when a person can leave, such as shareholder or service agreements. You should carefully review these documents to ensure you comply with the required procedure. Usually this is so important that you will obtain specialist advice on your particular situation before taking any steps. 

Reasons for Resigning

An individual might choose to leave for many reasons, including:

• Personal circumstances, such as family issues or ill health. 
• Career change, if they want to explore new opportunities. 
• Disputes with other directors, including arguments over business strategy or daily decision-making. 
• Conflicts of interest, for example, if a transaction or business decision impacts their ability to remain impartial or act in the company’s best interests. 
• Legal concerns, such as becoming aware of illegal conduct within the organisation and deciding to remove themselves to avoid implication. 
• Retirement, if they’ve reached a certain age or simply decided they no longer want the same responsibilities. 

What Is the Process for Resigning as a Director?

You should always check the Articles of Association and other relevant documents to establish the correct process. Generally, you’ll need to take the following steps. 

1. Prepare a Resignation Letter

Start by preparing a formal letter of resignation. It should state your intention to leave and the effective date of termination. You don’t have to explain why you’re resigning, but doing so can help preserve existing relationships and provide clarity.

2. Submit the Letter to the Company

Send the letter to the board of directors or the company secretary by post or email. You can also hand-deliver it. It’s best practice to have a clear record of delivery and an extra copy of the letter to avoid any issues. You should also ask the company to confirm receipt. 

3. Board Acceptance

In some cases, the board will need to hold a meeting to formally acknowledge the resignation. They should confirm the meeting’s date and time and prepare board minutes so there’s a clear and accurate record of their acceptance. 

4. Inform Other Stakeholders

There may be other interested parties, such as clients, shareholders, and suppliers, whom you should inform about your departure. While not necessarily a requirement, it’s considered good practice to keep them updated and provide a new point of contact for when you leave. 

What The Company Must Do

1. Review Contracts

If you’re also an employee or shareholder, the company should review the relevant agreements to determine any notice periods, severance pay packages, or limitations. 

2. Update the Register of Directors

The business must update its register by removing the individual from the list of directors. They must keep the updated records at their registered address. 

3. File Form TM01 

Under section 167 of the Companies Act 2006, the business must inform Companies House by completing and filing Form TM01 within 14 days of the effective resignation date. They can do this by post or online. Failure to do so can result in penalties. 

4. Appoint a Replacement

If you’re a sole director, the company must appoint a replacement before or at the same time as your departure. A company cannot exist without a director and will be struck off the register if there’s no replacement. 

Am I Still Liable if I Resign as a Director?

You can still be held liable for decisions you made during your appointment if, for example, you breached any of your duties while in office. The company can take legal action against you for any consequences that arise as a result. 

However, generally, you cannot be held responsible for any decisions made following your departure. Importantly you might still have continuing liabilities under items such as personal guarantees you have given during your directorship- these do not simply end because of your resignation. You might also have continuing liabilities under the shareholder agreement even though you have no control if you’re no longer a Director. For this reason this is a serious step and not to be taken lightly. 

Frequently Asked Questions

How Much Does It Cost To Resign as a Director?

There are no fees for filing the TM01 with Companies House. However, you may want to seek legal advice to ensure you comply with the correct procedure. The company may also impose specific fees or penalties, which you should check in advance. 

How Many Weeks Notice Should a Director Give?

The law doesn’t impose a statutory notice period for directors, but the Articles of Association may specify the relevant period. If there’s no requirement, it’s best practice to provide reasonable notice, which should be considered in the context of your role and duration at the company. 

Do I Lose My Shares if I Resign as a Director?

No, your role as a shareholder is separate from your role as a director. You will keep your shares unless the terms of your departure require you to sell or transfer them. You should check the Articles and your shareholder agreement to understand the implications. 

Final Thoughts

Resigning as a director involves several stages you must follow to ensure a smooth exit. Understanding the pros and cons of a resignation before you action anything, and ensuring it is the best option for you overall, is very important. Once you inform the company of your termination, they must also take certain steps to update legal records and appoint a replacement where necessary. 

If you’re considering leaving your company and need guidance on the process, where you stand or want help with a boardroom director or shareholder dispute, contact our specialist solicitors at Helix Law for advice. Our commercial litigation team act nationally and will be happy to assist you.