To resign as a director, or not resign, that is the question?

The process and impact of resigning as a company director is much misunderstood. The basic rule is “resign in haste, repent at leisure”.

It is very easy to resign.

Notice to the company is all that is required and this can be verbal. There is no legal obligation for the resignation to be in writing. Once the notice has been given, it cannot be withdrawn.

Importantly, the resignation does not require any acceptance by the company to be effective. The act of resigning takes effect upon delivery of notice, even if the board or shareholders object.

What happens after a director resigns?

With regard to the impact of resigning, you go from having hands-on control of a company and the right of access to all key information, to becoming an outsider with little or no power. Even if you are a shareholder you will have minimal rights.

Risks of resigning during a shareholder dispute

If you are engaged in a shareholder dispute then you may have fundamentally weakened your position by in effect waiving your right to be involved in the management of the company.

What happens if you have made a mistake in resigning?

You may find it extremely difficult to get re-appointed as a director and in any hostile situation, with the absence of a majority shareholding under your control, you are unlikely to be able to get back on the board.

To summarise, there may be good reasons for resigning but this option should always be considered a last resort in light of what you are losing.

Speak to our commercial disputes team

If you’re involved in a boardroom or shareholder dispute and considering resignation, we can help you understand your position and your options. Get in touch with our commercial dispute resolution lawyers for tailored legal advice before you take any formal steps.