To resign as a director, or not resign, that is the question?

15 February, 2013
The process and impact of resigning as a company director is much misunderstood. The basic rule is “resign in haste, repent at leisure”.
It is very easy to resign. Notice to the company is all that is required and this can be verbal, it is not necessary for it to be in writing. Once given the resignation cannot be withdrawn.
 
Contrary to popular belief there is no requirement for the resignation to be “accepted” by the company in order to be effective.
 
With regard to the impact of resigning, you go from having hands on control of a company and the right of access to all key information, to becoming an outsider with little or no power. Even if you are a shareholder you will have minimal rights.
 
If you are engaged in a shareholder dispute then you may have fundamentally weakened your position by in effect waiving your right to be involved in the management of the company.
 
What happens if you have made a mistake in resigning? You may find it extremely difficult to get re-appointed as a director and in any hostile situation, with the absence of a majority shareholding under your control, you are unlikely to be able to get back on the board.
 
To summarise, there may be good reasons for resigning but this option should always be considered a last resort in light of what you are losing.