What Are The Six Steps To Retiring As A Company Director?
There will come a time when company owners look to the future and start planning for their retirement. But it's not as simple as hitting the retirement age and deciding not to work anymore. Some steps and processes must be completed before you can resign from your company.
This post will talk you through the six steps you need to take before you can retire from your company.
1. Check your service agreement for a notice period
In most cases, the director will have a service agreement, employment contract or letter of appointment in place. Any of these documents should outline the steps required for retirement, including the notice period you need to give. This is typically between 1 - 12 months' notice.
If none of the documents outline a notice period, then it can be as little as one week's notice required.
However, if none of these documents are in place, you may need to seek legal advice.
2. Check for claims against the company
If there are any disputes, or claims against the company, these need to be settled before you serve notice to the company.
It's best practice to have a signed settlement agreement to record any settlement payments to the director.
If you're unsure how to put this in place, it's best to seek legal advice.
3. Sign a letter of resignation and serve notice to the company
Again, you will need to turn to your service agreement, employment contract or letter of appointment, which will outline how you will need to serve notice to the company.
Typically, you will need to serve notice in writing to a specified person in the company's registered office.
Remember: if you do not properly sign and date the notice, or if you do not serve it correctly, it could be classed as invalid, and you may be in breach of your contract.
If you're unsure about how to serve notice to the company, then you must seek legal advice.
4. File Form TM01
You must file Form TM01 with Companies House. If you fail to do so, you will still be showing as active on the Companies House register and will therefore still have a legal responsibility towards the company.
5. Check for post-termination covenants
In most cases, the employment contract, service agreement, letter of appointment or shareholders' agreement will contain details of any post-termination covenants. Typical covenants include the inability to work for a direct competitor, prohibitions on poaching clients and current staff of the company.
There may also be confidentiality requirements, such as the director not taking any customer data without the company's consent.
The director may also have to return any property belonging to the company, such as portable devices and keys.
The company could make a claim against the director if these provisions are not met.
6. Find out what happens to your shares
Many directors will own shares in the company they are planning to leave. When this happens, they will need to check the Articles of Association and the Shareholder's Agreement (if applicable) to check what will happen to their shares.
It may be the case that an automatic transfer notice will be served to the director when they resign.
You will also need to keep in mind that it may set out a specific way in which the shares are to be valued, which may or may not work in favour of the director.
If there are no share transfer provisions in the Articles of Association or the Shareholder's Agreement, you will have to enter negotiations with the company for the sale of the shares.
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