What Happens When A Director Resigns?
You may know that limited companies require directors, but understanding what happens when one steps down is less common knowledge.
If you have a private limited company, then you’ll need to appoint directors who are held accountable for the running of the company, with key responsibilities relating to accounts, reporting and taxation. You’ll need a minimum of one director for private limited companies and two directors in the case of public limited companies. However, as the years go on, naturally there are changes in every business and sometimes you may find it necessary to swap your directors, perhaps due to retirement or a change in business interests. If you reach a point where a director is no longer able or willing to be involved in your limited company, then these are your next steps.
In the case of a director who wishes to step down from their position, they should submit a formal letter of resignation. They don’t need to state a reason for withdrawing as a director, but they will need to supply a definite end date from which they’ll be leaving the company. A copy of your letter should be given to all remaining directors who will be tasked with finding your replacement, although this isn’t your personal concern or responsibility.
A company is not allowed to run without having the required number of directors in place. If your limited company continues to function without a full quota of directors, then you’ll find yourselves to be in breach of the Companies Act of 2006 according to a firm of chartered accountants in Peterborough. To avoid facing a penalty, which could range from fines, prosecution or disqualification, as soon as you’re aware that you’ll be losing a director, you should immediately hold a meeting and seek to find another candidate to appoint as the replacement director.
Informing Companies House
Once you’re aware that you’re losing a director, you should contact Companies House to let them know about this change. Following your resignation being accepted by your director colleagues, they should fill out a TM01 form entitled ‘Termination of appointment of director’. If you have multiple directors resigning at once, then you’ll need a separate form for each individual. Once this has been filed, the former director has no liabilities with regards to the company, either currently or during their time there.
Appointing a New Director
You should concurrently fill out a new appointment form, which is the AP01 form. You can submit your form(s) in paper format or online if you’re already registered with Companies House. However, it is recommended that you choose digital submissions as they’re typically actioned within 24 hours, whereas paper filing can take Companies House between 7-10 days to modify their records.
Changing the named directors of your limited company is simple when you know how. Remember also that Companies House need to be kept informed about other minor adjustments to your director’s details including changes of residential addresses or a change of name due to marriage or deed poll modification. Companies House can be contacted on 0303 123 4500 with any queries relating to your directorship.