Director Resignation

[MAEZM11]

Hi

We have a Ltd business and adopted model articles of association when the company was set up in 2018. There are 2 directors, who are both shareholders (myself with 70% and co shareholder/director with 30%).

In January this year, I informed my co-director/shareholder of my wish to step down from the business and offered them to take on my shares. I had not heard anything from them until 1st March, where they indicated they did not want to take this on (which is fine).

The very next day, I had an email from our accountant stating that my co-director wanted to resign as a director with immediate effect. This was the first I heard that they wanted to do this.

The accountant has asked for me to approve this, before filing with companies house. The question I have is can I disapprove this resignation?

The intention is to close the business in July this year, once all financial obligations have been met. The company is not insolvent. My worry is that if I accept the resignation, the co-director will tell customers that the business plans to close and that will effect my ability to generate revenue to meet our financial committments.

Any advice on where I stand is appreciated!

 

[Paul Norman]

You cannot force a director to not resign.

You can, however, make a severance deal with them, requiring silence on the impending closure. You probably cannot enforce that without big legal bills.

However, having made the decision to close, I would just crack on with that, sooner rather than later. And your co-director going just means you get to do that your way. I would accept the resignation, get them to agree to some kind of deal (you will know something of how trustworthy they are) and press on with winding down the company.

Remember, too that although they are no longer a director, they are still a shareholder.

 

[WaveJumper]

These threads always strike me as odd and what I mean by this is it not time to sit down, face to face with your fellow shareholder / director and thrash out what you both want for the future and how best to achieve this in both your best interests

 

[Paul Norman]

These threads always strike me as odd and what I mean by this is it not time to sit down, face to face with your fellow shareholder / director and thrash out what you both want for the future and how best to achieve this in both your best interests

Yes. It is. That is always the right way to proceed. So often relationships seem to be left to drift onto the rocks, making normal civilised business negotiation out of the question. Although in this case that might not be a fair accusation, it is certainly heading off down a road that leads there.

Business people watching too many soap operas, I fear.

 

[claire_b]

You're talking to each other *through* an accountant. Interesting.

 

[The Resolver]

Make it clear you to her will not now be closing down the business.

You can tell the accountant you do not approve her resignation which you can say puts her in breach of the implied agreement on the joint venture not to walk out at so early a stage and you do not approve the accountant filing notice at Companies House. Note that he has only said she 'intends to resign' so if no note of resignation has been received by you then she has not yet resigned.

To clarify, as Paul said, you cannot prevent her resigning (and actually, Once she actually resigns, would be putting yourself in breach of Company law in not notifying CH so don't for long) but it could still amount to a breach of contract .She needs to be notified and understand tht potential liability for her. Also, depending on circumstances, resigning could itself be an act in breach of the statutory duties on directors if it had a foreseeable damage that would fairly immediately befall the company, maybe putting the company in breach of a contract with a customer that was conditioned on her remaining a director.

By all means book yourself in for a free advice call with me so you can tell me in confidence more about the back story. This looks mostly in need of Mediation.

The company is not insolvent. My worry is.........(snip)....... and that will effect my ability to generate revenue to meet our financial commitments.!

Slight contradiction here because if you cant pay current creditors without new future income then the company may already be satisfying the insolvency test.. Maybe the accountant informed her of that risk and the consequent risk on directors in continuing to trade which led to her wish to resign.