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If you plan on resigning as a director from your company, the process will involve a series of essential steps to ensure a smooth transition while fulfilling the attached legal obligations. Directors play a pivotal role in a company’s governance and, therefore, have a number of compliance obligations to note. As part of this, any director resignation must adhere (at a minimum) to the legal procedures outlined in the Companies Act 1993. This article will outline the steps and considerations to successfully resign as a company director.
Understanding Director Resignations
A director is an individual appointed to govern a company’s business and affairs. Each registered company in New Zealand must have at least one director. Likewise, a company must record and keep updated all relevant information regarding the current directors on the Companies Office Register and the company’s internal directors’ register.
At all times before resigning as a director (even when you plan to resign in the near future), you must ensure you continue to comply with all your usual director duties and obligations until your resignation is effective, as well as the responsibilities that apply as a result of your resignation. These include:
- attending board meetings;
- maintaining company confidentiality; and
- complying with your director duties. For instance, exercising a duty of care and acting in good faith and in the company’s best interests. This might look like maximising profits and considering environmental, social and governance matters.
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1. Drafting the Resignation Letter
If you intend to resign as a director, you will need to draft a formal resignation letter (this serves as your “notice” to the company), which should include the following:
- a clear statement of resignation;
- effective date of your resignation as director;
- your signature; and
- the date of the letter.
It is important to adhere to any specific requirements about the contents of your resignation letter and understand ongoing matters that will impact you post-resignation. Such ongoing matters may include restrictive covenants to limit your activities following your resignation. The company may also have some standard wording it requires to be included in a resignation letter. As such, it is worth checking with the balance of the board if such requirements apply.
2. Board Notification and Acceptance
You should then provide the formal resignation letter to the chair of the board or the board as a whole. The board will then typically formally acknowledge and accept your resignation through a written board resolution or minutes.
3. Handing Over Responsibilities
After the resignation is accepted, the departing director should ensure a smooth handover of responsibilities. Likewise, transfer necessary information to fellow directors to assist in the company’s transition to a new director (if a replacement director is being appointed).
4. Update Company Records
Following the resignation, the company must update the Companies Office Register to reflect the change in directors, as well as the company’s internal directors’ register. This is a company obligation (rather than your personal responsibility). The company must complete this task within 20 working days of your resignation.Continue reading this article below the form
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Legal Implications and Liabilities Upon Resignation
Once you have completed your resignation as director, you may still be subject to liabilities in your previous role as a director. Directors remain accountable for actions taken during their time in the office, including any legal proceedings or obligations the company incurs. This applies to any statutory responsibilities such as:
- financial records;
- compliance with tax obligations; and
- adherence to employment laws that occurred during your time as director at the company.
In some circumstances, you may seek indemnification and release yourself from liabilities upon your resignation. However, this may involve negotiating agreements with the company or seeking legal advice to safeguard interests during and after the resignation process. This will ensure that your rights and concerns are appropriately addressed with compliance with the law as you transition out of your role as director.
Adhering to the resignation procedure may release you from future liabilities associated with the director role. Seeking legal support is strongly advised to assist with your resignation process as individual circumstances vary, resulting in the need for specific statements in a resignation letter. Some key things to note when you resign as a company director include:
- notifying the company board and fulfilling notice periods outlined in agreements;
- including the effective date of resignation, which can be future or immediate;
- aiding in the transfer of director responsibilities; and
- ensuring that the Company Register is updated.
If you need assistance resigning from your director role, contact our experienced business lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.
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