Director Resignations: Things to Consider

What documents should be considered and why?

The main company/commercial documents a company/director will need to consider are:

• Articles of association of the company (Articles). These set out the requirements or formalities relating to a director’s resignation. Typically, a director can resign at any time by formal notice in writing to the company (i.e. the board of directors). The Articles may also set out a requirement for the resigning director to notify the members (i.e. shareholders) of the company and any period of notice. If the director is a shareholder, there may be a requirement for shares owned by them to be transferred. The Articles may also set out any minimum number of directors the company is required to have and so the company should urgently address any breach of this provision as a result of the resignation (i.e. by appointing a replacement director).
• Service contract. If the resigning director is an employee of the company, their service agreement should be reviewed and complied with (e.g. regarding notice periods). The company and the resigning director may wish to consider entering into a settlement agreement (see our comments regarding waivers of claims in “What should the letter of resignation include?” below).
• Shareholders’ agreement. If the director is a shareholder, consider whether there any implications for their shareholding e.g. is there a requirement for their shares to be transferred upon the termination of their employment.
• Loan agreements. Where the director has made any loans to the company (or vice versa) that remain outstanding, it is important to consider the repayment terms of any loan and the extent to which the loan is affected by the resignation.

What should the letter of resignation include?

A letter of resignation will usually include formal notice of resignation as a director and the effective date of such resignation. Where a director is also an employee it may be necessary to expand the letter of resignation to include the director’s resignation as an employee of the company.

A company will usually seek to include a “waiver of claims” in the letter of resignation, where the director releases all and any claims or rights of action of any nature against the company arising out of the termination of their office (or their employment, if applicable). If the letter does include a waiver, it should be signed as a deed, which will protect the company in the event that there are any disputes about consideration provided for such waiver. It is worth noting that a waiver of claims in a letter of resignation will not operate as a waiver of all employment claims because certain statutory employment rights and discrimination claims can only be waived or settled by way of ACAS conciliation or a settlement agreement.

Where the resigning director is also an officer of any subsidiaries, it is best practice for separate letters of resignation in the same terms to be delivered by the director and addressed to each relevant subsidiary.

Is a board meeting required regarding the resignation?

Although no board resolution is technically required upon a director leaving office, it is best practice for a company to hold a board meeting to consider the notice of resignation and resolve and accept the resignation.

Are any filings at Companies House or updates to the company’s statutory books required?

Form TM01 should be filed at Companies House within 14 days of the termination.

The company will also need to update its register of directors and register of directors’ residential addresses to reflect the change.

If the director is also a shareholder of the company and is required to transfer their shares in the company as a result of their resignation, the company’s register of members, and possibly its register of persons with significant control (if relevant), will need to be updated following that transfer and any relevant Companies House filings made.

What if the person resigning is a sole director?

If the person resigning is a sole director a replacement will be needed urgently as otherwise the company will be in breach of the Companies Act 2006.

If you would like advice in relation to director resignations, a member of our Corporate & Commercial team will be delighted to assist you.