A person may cease to be a director of a company by resignation. A director may resign from the company for several reasons, including ill health, disqualification, conflict with other directors or due to a change in management or ownership of the company.
And when a company’s director decides to quit, the company can’t make them stay. Even if other directors don’t like the idea of the director resigning, their disapproval doesn’t count as a good reason to stop the director from leaving.
In such an event of resignation, the Registrar of Companies, ACRA, must be notified within 14 days from the date of resignation. Upon notification, ACRA will make necessary changes to the statutory public records to reflect the change of director.
While the provisions for the appointment of directors are clearly articulated in the Companies Act (Act), the provisions relating to the resignation of a company director are conspicuous by their absence.
What Happens When a Company Director Resigns?
Section 145 (1) of the Act requires every company to have at least one ordinarily resident director at any time. As for provisions regarding the resignation of directors, they are generally discussed in a company’s articles of association, which usually allow resignations to be effected by simply giving notice in writing to the company.
Thus, the office of the director is governed by the terms of a contract between the director and the company or the provision in the memorandum and articles of association of the company subject to the provisions of the Act.
It must be noted that a company cannot prevent a director from resigning on the grounds of non-approval by the other directors or members.
This is unless such consent is made as a condition precedent for a valid resignation in the memorandum or articles of association or the contract between the company and the resigning director.
In Singapore, a director’s resignation is valid provided that:
- The resignation procedure is in accordance with the company’s constitution and
- The company must have at least one remaining director residing in Singapore.
The notice of resignation must be given in writing, and such written notice must be sent by registered mail to the registered address of the company.
How To Notify ACRA?
According to the Act, when a director has validly resigned from the company, the company is obliged to lodge a notification of his resignation with the Registrar. The notification of resignation can be made online via BizFile by selecting the link “Notification of Cessation (Resignation) – Applicable to Local Company, LLP and LP”. The notice of resignation made by the director and the acknowledgement by the Board of Directors must be attached.
The outcome of the notification will be emailed to the registered email address of the company, or the applicant may check the status online. Generally, the outcome is posted within three working days.
However, ACRA may contact the former director who has tendered the resignation to verify the claim. In some cases where a detailed investigation is warranted then, ACRA may delay the outcome of the notification.
Some occasions warrant the resigning director to notify the ACRA himself. Such self-notification may be lodged when
- The resigning director has reasons to believe that the company will not notify ACRA of his or her resignation.
- The company secretary has resigned, and there are no directors, or the remaining directors are disqualified, and there are no other officers in the company to notify ACRA.
What are the next steps for the company?
When a director resigns, the company has to evaluate the implications of his resignation on its operations and constitution. Some of the considerations for the company are as follows if:
- A resigning director is the only ordinarily resident director of the company; then another ordinarily resident director must replace the resigning director.
- The resigning director has also played the role of the company secretary, then the company has to appoint a company secretary as the office cannot be left vacant for more than six months at any one time.
- The resigning director is also a shareholder and the company’s article of association. Or its contract with the director requires the shares to be transferred to the remaining shareholders. Then, the procedure to transfer his shares must be completed.
- The resignation would affect the authorized signatory of the company. Then, it has to be duly amended. All concerned parties, such as the bank, vendors, and clients must be notified.
- Other parties such as the major investors, shareholders, customers, suppliers and employees need to be notified.
- The resigning director should remain in service during the period of notice or should be sent on leave.
What are the considerations for the resigning director?
The resigning director can notify ACRA of his or her resignation. However, before such self-notification is lodged. The resigning director must ensure that the company has been given proper notification of the resignation. As well as have reasonable cause to believe that the company will not notify ACRA. So, a person who has resigned from the office of the director of a company.
After waiting for a reasonable time following his notice of resignation to the company. Should check the ACRA registers to verify if the company has filed the notification and his or her name is taken off the register.
If no notification has been lodged and if he or she has reasons to believe that the company has failed to notify or will not notify. Then he or she must duly notify ACRA.
It must be noted that having resigned as a director of the company. The former director no longer has any authority to lodge any document on behalf of that company. Excluding the self-notification, lodging any notification/documents with the ACRA thereafter purporting to be made in the capacity of an officer of the company. He/she may be liable and deemed as lodging a false or misleading document with the Registrar.
What are the consequences of failure to notify?
If notification of cessation is not lodged with ACRA, this could amount to an offense of non-disclosure.
The company and every officer of the company who fails to report a director’s resignation or disqualification may each:
- be fined up to S$5,000.
- be liable to a default penalty if the offence continues after conviction.
Until the notification is lodged, the cessation will not take effect. The person will remain as a director in ACRA’s records until the notification is lodged. This means he is still responsible for managing the company.
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