Director resignations are a familiar occurrence in the lifecycle of a limited company. In this Q&A we set out the factors you should consider when a natural person (not a corporate entity) will resign amicably as an officer of the company and the formalities around such a resignation.
The main company/commercial documents a company/director will need to consider are:
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.
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.
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.
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.
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