Resigning as a company director is an important decision that should not be taken lightly. Proper consideration and evaluation of the potential impact of leaving one’s post are necessary steps to take before moving forward with a resignation.
A detailed handover plan, that outlines responsibilities and duties, should be developed to ensure all the commitments are completed in a timely manner before the latest possible date of resignation.
This will help ensure that both the company and all other personnel involved will remain unaffected by any management disruption. Additionally, proper communication is key: notifying colleagues, board members, and other directors of your intention to leave is mandatory for an orderly transition.
Even though resigning as company director can seem daunting, it may also open up new opportunities while being an unavoidable step towards professional growth and development.
Whatever the reason is behind it, resigning from a limited company is actually quite a simple procedure to go through.
Though, you need to be aware that there are certain steps you’ll need to take on your way to making sure everything is done in an official manner.
How to resign as a director
If you are wondering how to resign as a director, one of the most common errors that directors of limited companies make is that they go on believing that all they need to do in order to leave is notify Companies House and state that they want to resign by way of TM01, this is however incorrect. When you’re submitting a TM01 form, that will indeed take care of the administrative side of things for you, but you should let your fellow directors and shareholders know what you intend to do, also.
Ideally, you will do this by way of a formal written notice, which you can either send to the company’s address or leave it there the next time you’re in the office.
This letter should state your intentions to resign and reveal the date that it will be effective from. Try to remember that it is the company which you’re resigning from, so your letter of notice should be issued to the company itself. The TM01 form is to make Companies House aware that you have already resigned, so that they can take you off of their records.
Tell your fellow directors
Notifying Companies House of your resignation is not the sole step that needs to be taken when leaving a company. While submitting a TM01 form, which is what Companies House require, will take care of the administrative side, it’s important to inform all directors and shareholders by providing a written notice.
This should be addressed to the company itself, either left at or sent to their registered office, and should clearly explain your intention to resign and the date that your resignation takes effect from. Don’t forget that it is ultimately the company whom you are resigning from – issuing the TM01 form simply brings Companies House up to speed with this decision. Tell your fellow directors in order for them to plan accordingly for any future changes and maintain business continuity.
Will your name still be linked to the company?
You simply cannot re-write history no matter how hard you may try, so the chances are that your name will remain associated with the company in some way, yes. As you used to be a part of the business in question, your details will likely still be viewable via Companies House, whenever somebody searches for information about the said company.
Though, you will be listed as ‘resigned’, so people will at the very least understand that you are not part of that business any longer. All that is likely to be visible about you to other people at this point, is your name, date of birth and the dates which you started working for the company and left the company.
You can write to Companies House directly and attempt to get them to remove your details from their database, but it is unlikely that they’ll grant your request. Furthermore, is is extremely likely that details about you will appear on older documentation, such as your previous business’ end of year accounts, and they will all still be on file.
What happens after you resign?
Once you have officially resigned, you’ll no longer be a director, so from this point onwards you’ll not have the responsibilities of a director at the business. Though, this also means that you’ll no longer be able to access the company’s accounts, nor will you have the ability should be run (which is obvious, but you need to be clear that this will happen).
If the company in question is to encounter financial problems/difficulties at any point in the future, this will have no impact on you, as you’ll be completely disassociated from the business in this sense. Any problems the company has are no longer your problems, beyond your resignation. You will not be held liable for anything that happens to the company after you have officially resigned.
What happens if all directors of a company resign?
It is stated in the Companies Act 2006 that a private company is required to have at least one director and also states that a company must have at least one director who is an actual individual, and not simply a corporate vehicle. Furthermore, the structure of the company will set out the quorum for board meetings and the like, which will usually specify that a company must have at least one director to hold a quorate meeting. This should always be checked as it is common for the minimum to be set at a higher number.
How long does a company stay on Companies House for?
A company remains on Companies House until it is dissolved. This means that the company is closed and its details are removed from the public register. The process of dissolution can take several months to complete and involves submitting forms to Companies House and paying any outstanding fees.
Once a company is dissolved, its records will be kept by Companies House for a period of time, usually around 20 years, for historical and reference purposes to The National Archives (TNA). The company will no longer be in operation and cannot conduct business or enter into any legal agreements.
Are resigning company directors still linked to the company?
Are resigning company directors still linked to the company? The answer is yes. When a director resigns from their role, Companies House will continue to display the details of the director on their website, although this time it will be marked as “resigned”. The company itself will then usually send out an acknowledgement letter or email, and if the entire company is being dissolved it is possible for the record to be removed entirely from Companies House.
But even if not appearing as part of a legal document, resigned directors may still retain some level of influence over their business by acting as what is known as a ‘shadow director’ – someone who has vested interests in the company but is no longer officially registered as part of its day-to-day running.
Resigning as a company director can have some serious legal implications. Even when resigning, a director may still be held liable for future business decisions and investigated in the same way that other directors can. This is especially crucial to take into account if the resigning director has provided personal guarantees to secure loan repayments for the company beforehand, as they may still be held accountable in case of any defaults or breakdowns.
To avoid any potential risks, it’s highly recommended that resigning company directors seek advice from trustworthy sources before proceeding with the process.
After resigning, a director will find themselves in an undeniably precarious place; not only will they no longer have access to key financial information about the company, but they are also essentially putting themselves at risk for any potential insolvency issues that may arise. Unable to keep abreast of developments regarding their former company’s financial health, directors who remain guarantors for its loans will find themselves in a particularly vulnerable situation.
Moreover, the fact that the conduct of all directors from the prior three years remains under scrutiny in light of a possible insolvency means that those who have stepped down may still be exposed to legal ramifications resulting from their role on the board. It is thus essential that resigning directors remain apprised of their liabilities as they pertain to any guarantees or other commitments they may have made while still acting as company officers
Read more: Can you be a company director with a criminal record
Liability after resigning
Company directors are tasked with a set of general duties as outlined in Chapter 2 of the Companies Act 2006. Those that resign from their post as director may be relieved of liability for future acts or omissions of the company; however, dereliction of duty during the three-year period leading up to insolvency may lead to potential liability should an investigation be carried out.
This extends to shadow directors, those who exert influence over the board after their departure, with grounds for legal action still viable in this instance.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.