What to Do When a Company Director Resigns
A person may want to leave their position as a director of a company by signing a resignation.
There are many different reasons why a director might want to do this. Some of the most common reasons include conflict with other directors, poor health, disqualification, and change in management or ownership of the company.
If a director of a company decides to signs a resignation, it is very important for the Registrar of companies to be notified within 14 days from the date of the resignation. While it is true that the provisions for the appointment of directors are more than clearly stated in the Companies Act, the provisions that have anything to do with the resignation of a company director are conspicuous by their absence.
What Happens if a Company Director Decides to Resign?
It is very important for any company to have a resident director present at all times. In fact, the more resident directors the company has, the better. This is stated in Section 145 of the Act. The company’s articles of association allows a resignation to be in effect simply by giving notice in writing to the company. Therefore, the office of the director is controlled by the terms of a contract between the company and its director – either that or in the provision in the memorandum and the articles of association of the company subject to the provisions of the Act.
It is very important to note that a company does not have the right to prevent its director from resigning on the grounds of non-approval by other directors or members of the company. This can only happen if such consent is made as a condition stated in the provision in the memorandum or the articles of association of the company, or if the term is stated in the contract itself.
In Singapore, a director’s resignation is only valid when the company has at least one other director currently residing in Singapore. It is important to note that the notice of resignation needs to be given in writing, and such written notice needs to be sent by a registered mail to the registered address of the company.
How to Notify the Registrar of Companies?
When a director resigns, the company is expected to lodge a notification of the director’s resignation with the Registrar of companies. It is a simple process and can be done online. Keep in mind that both the notice of resignation provided by the resigning director and the acknowledgment made by the Board of Directors are required. The outcome of the notification will be delivered to the company in the form of an email message. Alternatively, the applicant can check the status online. Generally speaking, the outcome is available within three working days. In some cases, the Registrar may contact the resigning director to verify the claim, or delay the notification outcome.
In some cases, the resigning director may be required to notify the Registrar him or herself. This may be the case if the resigning director has a good reason to believe that the company will not notify the Registrar of the resignation. Another time when this may happen is when the company secretary has resigned, and there are currently no officers present or qualified to notify the Registrar of companies.
What is the Next Step for the Company?
When a company director decides to resign, the company needs to evaluate the implications of the director’s resignation on both its operations and its constitution.
It is very important for the company to have a secretary present at all times. The office should never be left vacant for more than six months.
If the director’s resignation affects the authorized signatory of the company, it needs to be duly amended. All concerned parties, including all shareholders of the company, must also be notified. Keep in mind that the resigning director should either be kept in service during the period of notice, or sent on leave.
All companies are required to hold Annual General Meetings. Read to assure that your company did not breach any company laws implied:
- Annual General Meetings (AGM) in Singapore: Everything You Need to Know
- Penalties for Failing to Hold Annual General Meetings or File Annual Returns
What are the Considerations for the Resigning Director?
The resigning director can notify the Registrar of their decision to resign. However, the resigning director must first ensure that the company has been given proper notification in regards to their decision to resign, and have a good reason as to why they believe that the company will not notify the Registrar of companies itself. If the company has failed to lodge any notifications in regards to its director’s resignation, the resigning director must duly notify the Registrar of companies.
What are the Consequences of Failure to Notify?
If a company fails to report its director’s resignation, it could end up facing serious consequences. The penalized company could end up getting fined up to S$5,000. As long as the notification is not lodged with the Registrar, the resignation will not take effect. In other words, the person who is stated as the company’s director will remain in that position in the Registrar’s records until the notification is lodged.
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