There are various reasons why you may want to resign as a company director in the UK.
It could be because you no longer want to be involved in the business or because you are taking on another non-directorship role within the same company.
You may also want to resign if there is a change of control of the company.
In order to resign, company directors must follow all of the relevant rules and procedures set out in various agreements, as well as ensuring that Companies House is informed.
Not doing so can lead to complications for both the business and the departing director.
Resigning as a director - the process
There are 5 common things you should be aware of when resigning as a director:
- Consult the relevant contracts, agreements and Articles of Association to avoid future complications or disputes. Inform the other directors of the company and let them know of your resignation in writing.
- Inform other stakeholders including clients, partners and suppliers, and ensure they have a new point of contact.
- Let Companies House know about your resignation by filing the relevant information.
- Be aware of your relationship with the company after you have resigned.
What to consider before resigning
Be aware that a director leaving a company may have agreed to certain terms such as having to sell their shares under the rules contained in the Model Articles of Association.
Any director's loans - either made from the director to the company or vice versa - should be settled prior to departure.
It is important that you seek independent legal advice if you are unsure what your obligations are as a director / shareholder, particularly as both the articles of association and shareholders agreement may have changed over time.
There may also be potential for disputes with other directors and shareholders, depending on your reasons for leaving. This may be more common where assets or liabilities are involved.
Letting fellow directors know
In most cases your resignation, or intention to resign, will have been discussed with the other directors before this is communicated to the company.
In some cases, however, a director may be unaware that he/she is going to be asked to resign. Therefore, it is good practice to let them know verbally and inform them of the company’s intention to issue the notice (even if it isn't immediate) and ask for their agreement.
Whether you are informed or not, formally asking for your agreement can avoid any later dispute over the matter.
As a resigning director, you’ll need to consult your directors service agreement to ensure you comply with any notice periods or clauses such as restrictive covenants.
Your resignation letter should state your intention to resign and advise that you will be ceasing to act as a director at a specific date in the future.
Company Director / Shareholder
If you are a shareholder as well as a director, then you should consult your shareholders agreement which will set out whether you need to transfer shares or whether there are any other specific clauses you must follow.
There may be specific provisions on how they can offer their shares for sale contained in the articles of association and shareholders’ agreement.
Inform Companies House of the resignation
To inform Companies House and terminate the appointment of a company director, you need to submit a Terminate an appointment of a director (TM01) form to companies house. This can be done online.
A notice of resignation must contain:
- The name and registered number of the company
- The company's registered office
- The date the director resigned from office
- The date on which it took effect.
The form must be signed and submitted within 14 days of the official resignation.
What should the company do after the resignation?
As well as making sure that Companies House has been informed, the resignation should be recorded in minutes of the next relevant board meeting.
Shareholders may need to be informed about the resignation of a director, particularly if the director was a shareholder of the company.
For registration purposes, a resignation takes effect from the date on which it is notified to Companies House.
Resignations can take place at any time during a financial year, as long as they are notified to Companies House by its deadline.
If the resigning director is a sole individual director then the Companies Act 2006 states that a replacement will be required. This must be done before the resignation is official or the company could be struck from the register.
Companies will need to ensure that the register of directors along with addresses are up to date.
Are resigning company directors still linked to the company?
The details of the resigning director will still appear on the Companies House website, however it will say “resigned” instead of “active”.
Once you have resigned, the company will write to you, acknowledging your resignation.
If the company is going to be dissolved, you can apply to have it removed from the Companies House register.
It is also possible for a director to act as a ‘shadow director’– someone who remains with vested interests and influence in the business, yet doesn't officially hold any position within the company.
There are legal implications attached to this however, such as the fact that you can still be deemed liable for future business decisions in the event that something goes wrong.
It’s recommended that you seek advice before proceeding. Shadow directors can still be investigated and held liable in the same way that other directors can.
A founding director may have been involved in seeking funding for the business during the early stages and therefore provided personal guarantees to allow the company to borrow money.
After a resignation, the director who provided the guarantees may still be liable if the company does not keep up loan repayments to the lender.
After resignation, a director will not have access to key company financial information and is therefore at a significant disadvantage if the company gets into financial trouble and the director remains a guarantor of a loan.
Furthermore, if a company goes insolvent, the conduct of directors from the previous three years may be investigated, regardless of whether they have resigned during this period. This means you could be held liable if it is deemed that you failed to perform your duties as a director.