Want to know how to resign as a director of a limited company?
This blog explains how to do just that, including the steps a company must take when a director resigns. We also walk you through what is displayed at Companies House and the level of liability that exists after a resignation.
What a director needs to do to resign
Step 1: Check the terms of your service agreement or employment contract to find out if there is any specific notice period or method of resigning.
Step 2: Provide a written letter of resignation to the board of directors. A formal email will usually suffice, but some directors may prefer to send a physical letter of resignation. If sending a letter by post, use the recorded delivery option and send this to the company’s registered office, for evidentiary purposes.
Step 3: If the director is also a shareholder, they should consult any shareholders’ agreement in case this requires that they transfer company shares or follow certain procedures.
Step 4: Optionally, inform existing clients and suppliers of your departure and provide details of the relevant replacement contacts.
What a company needs to do when a director resigns
Step 1: Within 14 days of the date of effective resignation, the company must inform Companies House of the departure. Form TM01 should be used for this purpose – and this can be completed online.
Step 2: The resignation should be recorded in the minutes of the next board meeting and the company should update its register of directors.
Please note: If the director resigning is the sole individual director of the company, a replacement director is required or else the company will be struck off.
Reasons for resignation
A director may decide to resign from a company for purposes of retirement or ill health. Sometimes they may want to free up their time to spend on other business ventures or activities.
At other times, a resignation may be ‘requested’ by the company, as a more diplomatic alternative to essentially sacking the director in question. This may happen in the case of a misdemeanour, poor performance, or simply internal disagreements.
What is displayed at Companies House after resigning
Details of a company director who has resigned will remain on the Companies House website following retirement. However, their status as a director will show up as ‘resigned’ as opposed to ‘active’.
Details shown include:
- The correspondence address*
- The former role of the director
- The date on which the director was appointed
- The date on which the director resigned
- The nationality of the director
- The director’s country of residence
- The director’s listed occupation
* This correspondence address is also called the ‘service address’ or ‘directors’ service address’ and is where directors receive official correspondence from Companies House and other government agencies.
Rapid Formations offer a Directors Service Address at a cost of £24.00 per year, for directors, company secretaries and PSCs at their office locations in London and Glasgow for £24.00 per year, including the delivery of all statutory mail.
Liability after resigning
Company directors have a set of general duties which are set out in Chapter 2 of the Companies Act 2006.
When they resign as a director, they are no longer liable for future acts or omissions of the company. However, if the company goes insolvent, the conduct of all company directors during the previous three years (including those who have resigned) will be investigated and they can be held liable for failures in their duties.
Furthermore, directors who continue to exert influence over the board following their departure may be considered shadow (or de facto) directors – and therefore still liable.