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As a director you may be considerting resigning for reasons such as strategic disagreement, loss of confidence in the board, personal circumstances, or to avoid potential conflicts of interest or liability.
Under English law, a director can resign by giving written notice to the company, typically by letter or email. No special form or board approval is needed unless the company’s articles say otherwise.The process usually involves giving written notice in line with the service agreement or articles, ensuring any board resolutions are recorded, and filing the resignation (Form TM01) at Companies House.
The implications and risks of resignation can be significant, including potential legal, financial, and practical risks. Directors may remain liable for past actions, including breaches of duty or wrongful trading, and could lose out on remuneration, bonuses, or share options.
It's good practice to file the resignation promptly with Companies House using Form TM01.
Personal Guarantees - you may remain liable if you have given a personal guarantee for company borrowings unless you can get this cancelled or some form of relaible indemnity in place.
Conflicts of Interest - even after resigning, directors need to be careful about conflict of interest issues, possibly including exploiting opportunities they became aware of while in office and other conflict of interests.
Insolvency Risks - there are potential risks if you resign when the company is in financial difficulty. Directors who resign shortly before insolvency can still be investigated. Liquidators can look back at your conduct for up to 3 years. Resignation won't protect you from wrongful trading claims if problems existed during your tenure.
Post-termination restrictions - review your service agreement for restrictive covenants (non-compete, non-solicitation clauses). These restrictions typically remain enforceable after resignation. Consider negotiating about these terms as part of your departure. Breach of restrictions can lead to injunctions or damages claims.
Leaver clauses - bad leaver provisions may force you to sell shares at less than market value. Check shareholders' agreement for specific resignation consequences. Consider timing of resignation in relation to vesting schedules and understand dividend rights post-resignation.
Indemnities and insurance - review existing indemnities from the company, consider negotiating a specific resignation indemnity and check if your D&O insurance covers claims made after resignation
Our firm specialises in advising directors on exits from companies. We can:
Review the terms of your employment or service contract – check notice requirements, restrictive covenants, and termination provisions.
Assess fiduciary duties – advise on ongoing duties and avoiding conflicts or misuse of company information.
Consider board and shareholder issues – ensure proper notice and compliance with company constitution and Companies House filings.
Evaluate potential liabilities – review exposure for wrongful trading, guarantees, or ongoing investigations.
Protect your position – negotiate exit terms, references, and any post-departure restrictions.
Contact us for a confidential discussion about your situation.
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