Director's resignation require approval of the board?

[EDRIAT]

Hello all.

Back in 2004 I formed a Ltd company, I took 80% of the shares and another silent partner took 20%.

A short while later another person joined the company. He was appointed a Director, along with myself. The company shares were reallocated whereby I was left with 75%, the original silent partner was left with 5% and the new person took the remaining 20%.

In 2009, for my own personal reasons, I wanted to take a lesser day-to-day role, so myself and the 20% Director/shareholder (with the approval of the 5% shareholder) struck a deal which saw him take 50 of my 75% and take over control and day-to-day management of the company. I remained a Director of the company.

The company was formed using what I believe were standard Articles of Association.

There was talk of, and a series of draft documents in relation a Shareholder Agreement on numerous occassions since the third person joined, but no agreement was ever finalised.

In the past two years or so, our working relationship has soured considerably for a number of reasons, fueled partly by the fact that the company has suffered financially (in terms of a slow down of sales etc) since our deal in 2009, which in turn has caused some friction between us.

Circa 4 months ago I informed him by email that effective immediately I was resigning from my position as a Director of the company. On the very same day, I completed and submitted the TM01 form to Companies House and they processed this about 7 days later.

Since then, despite a few attempts at reconciliation, things have deteriorated considerably and I now have major concerns with how the company has been run since my resignation.

I know for example, that he hasn't been paying supplier invoices (whilst running up additional costs from them) for most (if not all) of the period since I left and I suspect that the purpose for not paying has been to allow the company bank balance to return to a positive figure and out of the overdraft for which he is a personal guarantor.

I've now been informed that an Insolvency Practitioner has been appointed and that the IP will be in touch with me shortly. :|

The other Director of the company has also stated that my resignation apparently required the approval of the Board of Directors (there was only me and him) and that because I didn't inform the Board and that there was no Board Meeting, his view is that my resignation is/was null and void.

I understand that anything of this nature would be detailed within the company Articles of Association. I have them. I can find no record whatsoever within them stating that the Board of Director's must approve the resignation of a Director.

I think he's talking rubbish... but I'd very much like confirmation.

 

[penquanash]

Shareholder approval is required to dismiss a director. (The directors themselves can remove a director from the position of managing director or chairman - but he or she will still be a director.) The board would therefore need to call a general meeting . If the director is also an employee of the company, the directors will need to ensure that the dismissal respects his or her employment rights, in particular their notice period under their contract or as specified by law, and their right not to be unfairly dismissed.

In practice, it is more common for directors to be encouraged to resign rather than actively forced out of office. In such circumstances a compromise agreement will often be drawn up, to cover future claims and possibly the departing director's involvement in competing businesses.

 

[EDRIAT]

Shareholder approval is required to dismiss a director. (The directors themselves can remove a director from the position of managing director or chairman - but he or she will still be a director.) The board would therefore need to call a general meeting . If the director is also an employee of the company, the directors will need to ensure that the dismissal respects his or her employment rights, in particular their notice period under their contract or as specified by law, and their right not to be unfairly dismissed.

In practice, it is more common for directors to be encouraged to resign rather than actively forced out of office. In such circumstances a compromise agreement will often be drawn up, to cover future claims and possibly the departing director's involvement in competing businesses.

That all makes sense in terms of actively seeking the dismissal/removal of a Director... but would a Board Meeting need to be called if I, as a Director, wish to resign from the position?

 

[penquanash]

Yes, you have to call a board meeting.
As a director, you may have no alternative but to resign. If you simply disagree with the strategy being pursued by the board, this provides a straightforward solution. However, if your resignation is prompted by concerns over the legality of the board's actions, you should take legal advice; resigning might not protect you from potential future liability for decisions taken while you were a director.

 

[EDRIAT]

Yes, you have to call a board meeting.
As a director, you may have no alternative but to resign. If you simply disagree with the strategy being pursued by the board, this provides a straightforward solution. However, if your resignation is prompted by concerns over the legality of the board's actions, you should take legal advice; resigning might not protect you from potential future liability for decisions taken while you were a director.

I have no concerns whatsoever about the operation of the company up and until the point I did resign - only the frustration of trying to do business with someone who wasn't too willing or cooperative in return, which drove me to the point of resigning as I couldn't see any logical way forward.

I'm not saying that I don't believe you... I just don't entirely understand.

If the Articles of Association don't stipulate that the resignation of a Director requires the approval of the Board, why would I need to call a Board Meeting to resign?

I just found this:

'Table A', the default model articles of association made under the UK Companies Act 1985, will normally be applied by companies unless they provide for alternative arrangements of their own. Table A says that a director may resign by giving notice to the company: in practice notice given to the company secretary will be appropriate. Table A says that notice may be given either in writing or in electronic form, using an e-communications address specified by the company. Where the notice is submitted in writing, Table A says that proof of an envelope having been properly addressed, pre-paid and posted will be conclusive evidence that the notice of resignation was given, and it will be deemed to be given 48 hours after it was posted. So if the resignation is not personally presented, it would be sensible for the director to send the notice by recorded delivery and to retain the proof of posting. If personally presented, it may be prudent to obtain a receipt if the resignation is being effected in contentious circumstances.

Where the notice is submitted in e-form, proof that the notice was sent in accordance with guidance issued by the institute of Chartered Secretaries and Administrators shall be conclusive evidence that it was given.

...

Acceptance of a resignation, usually by the chairman on behalf of the board, is usual but is not a prerequisite for the resignation to be effective - unless the articles stipulate otherwise.

The Articles of Association of the company in question start of with the title, "The Companies Act 1985-1989"

 

[Robert Pearce]

I agree with you, EDRIAT, that you shouldn't need Board approval to resign as a director (unless the Articles say otherwise).

If your company was formed in 2004, and you used standard Articles, they are probably Table A (as amended as Companies Act 1985 (Electronic Communications Order 2000). If so, clause 81 (disqualification and removal of directors) states:

81. The office of a director shall be vacated if-
(d) he resigns his office by notice to the company.

 

[Arhob1]

Of course you can resign. It would be akin to slavery if you were forced to carry on despite wanting to resign. If your articles and shareholders agreement don't say a board meeting is required to resign then your resignation stands.

There's a lot of confused posts above about how to handle the dismissal of a director but that is entirely diferent from a director resigning.