Stepping back as a Director but staying a Director

[Mark O’raw]

Good evening all,

Thank you in advance for your guidance and experience – I would like to speak with somebody who has been in a similar position I find myself.

Background: FT Director, Co-Founder and large share holder for 10 years of busy company who now wishes to step back, but not step down and does not want to resign as a director from Companies House.

Happy to step right back and allow the other director to lead the company, make the decisions allowing me to take a break. I don’t want any responsibilities or any jobs.

But the question is, is this allowed in accordance with the companies act 2006?

Do I need to resign or can I just disappear into the background and remain a director of the company?

10 year service I don’t want to resign.

Is this legal? If so great, if not how do I make it legal whilst minimizing my interference with the company day today running.

Thank you in advance

M

 

[GraemeL]

A Ltd Company? If you want to be a director, however active, then you needn't do anything regarding companies house.

However, all of the accountabilities and responsibilites you have as a director will remain. You cannot avoid those if you are a director.

(That supposes your Articles dont have anything that might preclude that, for example if there are only two directors and the quorum at a meeting has to be two in which case you have to be involved)

 

[Mr D]

You remain as a director you still have responsibilities as a director.
What you can choose to do - with agreement of other director - is reduce the duties you have taken on in the company.

 

[Mark O’raw]

Yes - A limited company

 

[KAC]

If you wish to remain as a director but abrogate from any responsibilities, you also need to ensure that you are not liable under any personal guarantees you may have given in the past in respect of the company's liabilities.

I also agree with @GraemeL and @Mr D

 

[Ozzy]

Have you thought about becoming a Non-Exec Director, taking on a more strategic role in the company but not involved in the day to day running of the business?

You will still be liable to the full extent of the Companies Act as a director, no avoiding that as already mentioned, but operationally in your day to day work you could step back and remain on the board in a NED capacity. I have three NED's within my business, and I also sit on the board of a couple other companies as a NED myself. It's a completely different dynamic and the SMT (Senior Management Team) and ET (Executive Team) find will find your input valuable - especially as being stepped back from the business and solely strategic will allow you to look at the business uniquely.

 

[Mark O’raw]

Hi Ozzy,

This is a great read - Thank you very much to you and the others so far!

Could I clarify and I think I know the answer as I’m piecing this together as I go - This means I don’t need to resign from companies house as in accordance to Companies House their is no difference between a Director and NED.

Second question - Can a NED still vote in Director board meetings?

I think this could be the solution - Let the lead take the lead with minimal fuss from the two other directors.

 

[Chris Ashdown]

You can stay as Chairman with casting vote, and Director but appoint a MD to run the company for day to day management

 

[Ozzy]

Could I clarify and I think I know the answer as I’m piecing this together as I go - This means I don’t need to resign from companies house as in accordance to Companies House their is no difference between a Director and NED.

Correct, in company law the concept of a Non-Exec Director doesn't really exist. A director is a director.

Second question - Can a NED still vote in Director board meetings?

This is a slightly more complex answer because it will ultimately depend on your company Articles of Association on how many votes a director has, and whether a Chairman as a casting vote, but I'll give my input from my own personal experience. Normally the more shares someone has the more votes they are entitled to but I feel that is not constructive to the smooth running of a board. On my board everyone is equal and I never consider my majority shareholder as any more authority in decisions, all are equal. There have been times we've disagreed on topics but I've never felt the need to "pull rank" and we've always worked out a resolution we've always ended up agreeing on. I feel that is more important than anything, basically always leave the ego's at the door before a board meeting.

 

[The Resolver]

You might insist, if not already provided, that the company has taken out , and maintains, good D&O insurance to protect you should you incur liability and possibly a detailed NED appointment contract to minimise disputes .

Normally the more shares someone has the more votes they are entitled to

Whilst you are correct, Richard, that the Articles may dictate that voting on the Board should be counted by shareholdings that is certainly not usual , at least not at the SME level, where it defaults to the traditional head count. Of course the majority shareholder(s) always has/have the power to remove directors who abuse that voting power.

Notwithstanding, your approach to always work to reach agreement is admirable.