Resignation, retirement and removal

What are the rules about a director's resignation?

Subject to the articles a director may resign at any time, either with immediate effect or from a specified future date. Company articles may specify details of how the resignation must be made but, unless they do, communication to the company is all that is required. It is good practice for the resignation to be in writing but, unless the articles say differently, it is not a requirement and an oral resignation will be valid. Once given, resignation cannot be withdrawn without the consent of the company.

I have resigned as a director but the other directors refuse to accept my resignation and they have just included me as a director on the annual return. Am I a director?

Unless there is some unusual provision in the articles you are not a director. Unless you specified some other date, you ceased to be a director as soon as your resignation was communicated to the company. The directors should have ensured that Companies House was notified that you had ceased to be a director and they should have done so within 14 days. They should not have included you as a director on the annual return.

I have heard that a director must step down on reaching the age of 70. Is this correct?

No this is not correct. Under the 1985 Act a director had to retire at the annual general meeting following his 70th birthday, but could offer himself for re-election. This only applied in public companies and in private companies that were subsidiaries of public companies. The requirement could, in any case, be overridden by the articles or a vote of the members. There is no such requirement in the Companies Act 2006.

Today is 7th September. I resigned as a director on 30th June with effect from 31st December. What are my rights and responsibilities until 31st December?

You are a director until 31st December and you have full rights and responsibilities until that date. The other directors must recognise your position and must, for example, allow you to participate in board meetings.

What are the rules about retirement by rotation?

The Companies Act 2006 does not require directors to retire by rotation and neither did the 1985 Act. Retirement by rotation only applies if it is a requirement of the articles.

Table A requires a third of directors to retire at each annual general meeting, but under the 2006 Act annual general meetings in private companies are only held if it is specifically required by the articles. It is a specific requirement of the 1948 Table A, but not of the 1985 Table A. The result is, if the 1985 Table A applies, that directors of public companies retire by rotation, but directors of private companies do not do so.

The new model articles for public companies require directors to retire by rotation. The new model articles for private companies do not do so.

Does that mean that in most private companies directors do not retire?

Yes it does mean that. They serve indefinitely until they resign, become disqualified or are removed.

Does Table A specify events which lead to loss of office by a director?

Yes it does. In addition to circumstances described in the answers to other questions, Table A deals with three circumstances:

The director makes any arrangement or composition with his creditors generally. This is in addition to formal bankruptcy as prescribed by law.

Mental disorder. This is obviously very sad and it is important that the precise wording be noted. Acting strangely is not by itself sufficient, which is just as well or a large number of directors might be relieved of their offices. The precise wording is:

'he is, or may be, suffering from mental disorder and either -

he is admitted to hospital in pursuance of an application for admission for treatment under the Mental Health Act 1983 or, in Scotland, an application for admission under the Mental Health (Scotland) Act 1960, or

an order is made by a court having jurisdiction (whether in the United Kingdom or elsewhere) in matters concerning mental disorder for his detention or for the appointment of a receiver, curator bonis or other person to exercise powers with respect to his property or affairs.'

(c) Absence without permission. This applies if the director misses every board meeting for six months and does so without the permission of the directors. The directors may, but do not have to, resolve that he be removed from office. The way that this works can be rather uneven between different companies because the number of board meetings held can vary enormously. Company A may hold weekly meetings and a director attending one out of 26 cannot be removed. Company B may hold just one meeting and a director that misses it without permission may be removed.

< Prev   CONTENTS   Next >