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Can You Resign As A Director Of A Company?

Sometimes it feels as though you’re constantly tied to the decisions you’ve made, such as keeping an old car until it literally falls apart, or staying at a job you loathe because you like where the office is located.

However, life sometimes has a way of forcing us to change our plans. So what once seemed set in stone becomes a decision you can easily change.

Being the director of a company is no different.

While you might start off thinking this is the role you want to do and the product you want to make for the rest of your life, things can change, and you might find yourself no longer wanting to run the company. So let’s take a look at how you can resign as a director.

What does it mean to resign as the director of a limited company?

Resigning as a company director is the decision to step down from the role of director voluntarily.

In some cases, other directors may ask you to resign, but again, this is voluntary, just as resigning from a regular job is different from being fired from it.

Remember, once you’ve resigned from being a director, you will no longer have any say over how the business is run on a day-to-day basis, and you’ll be released from any statutory duties.

However, if a breach of any statutory duties occurred while you were still a director, you can still be held liable for them. You cannot get away from liability through resignation.

What are the reasons for directors choosing to resign?

Every previous director has a personal reason for why they resigned, and it looks different for everyone, just as people resign regular jobs for reasons which are individual to them. However, there are some common themes for individuals wanting to resign:

  • Exploring other employment opportunities; this could be a full-time paid position in another business, or it could be starting another company that focuses on a different area.
  • Retirement, either due to age or ill health.
  • No longer wanting to be part of the day-to-day running of the business, but still wanting to remain as a shareholder and receive a portion of the profits.
  • Having a disagreement with the other directors on the future direction of the company. Sometimes these disagreements can be rectified to the mutual satisfaction of everyone involved, whereas other times, it’s best to walk away from the situation.

What’s the process the director needs to follow for resigning?

Resignation is a formal process with legal steps involved. The process must be carried out correctly; otherwise, there could be legal ramifications.

Step 1 - Check the articles of association

There are general steps you’ll need to follow to resign; however, there may be specific nuances outlined in the articles of association. For example, there may be a pre-agreed notice period that differs from the standard period, or guidance on what needs to happen with your shares.

Once you’ve checked the articles of association and followed anything outlined within them, you can move on to step 2.

Step 2 - If necessary, appoint a new director

Limited companies within the UK legally need to have at least one director running them.

If you’re planning to close the business, there are different steps you need to take, rather than resigning. To find out more, check out our previous post: My Company Has Failed: From Winding Up to Bouncing Back.

If your company already has other directors in place, you won’t necessarily need to hire a replacement, as long as the minimum number of directors is in place as outlined within the articles of association.

Step 3 - Send your resignation letter to the company

The company, directors and shareholders need to be formally notified of the resignation. Typically, a resignation letter includes:

  • Company name and company registration number (CRN)
  • The company’s registered office address
  • The resignation message (ensure it’s clear that you’re resigning your position as director of the company)
  • Any other information that’s required within the articles of association resignation process
  • The date you wrote the letter and the effective date of the resignation
  • Your signature

Email is typically an accepted form of receiving the resignation letter; however, if your articles of association state that it must be printed, send the letter to the registered office address via recorded delivery. This ensures there is a full paper trail related to the resignation letter.

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

So far, this article has explained what the director themselves needs to do to resign from the company. However, there are also steps the company then needs to complete to ensure the resignation is legal.

  1. Record the resignation in the minutes of a board meeting or in a director’s written resolution
  2. Update the company’s internal record
  3. Inform Companies House within 14 days that the director has resigned (this is done by filling in and submitting Form TM01)

Once these three steps have been completed, the director has officially and legally resigned.

Is that the end of the director’s liability?

Once the director has resigned, that’s the end of the majority of their liability. Any decisions made about the company moving forward are not theirs to make; therefore, they cannot be held responsible for the outcome of the decisions.

However, if the company goes into liquidation, the liquidators will review all of the decisions made by the directors over the last few years in an attempt to see where the issue arises. If the liquidators find the resigned director contributed to any failings, they may still be held liable for them.

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