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You may be a Director of a company and take active participation in the management of affairs of the company. We have noticed that many times a person becomes Director of a company and does not take active participation in the business due to various reasons. In that case, Director may choose to resign from the position of Director of the company. In this article, we shall discuss the legal way of resigning from the office of Director and its implications.
How to resign from the post of Director?
A Director may resign by giving a resignation letter/notice in writing to the Company. The resignation of a Director is governed by the provisions of the Companies Act, 2013. Section 168 of the Companies Act, 2013 deals with the resignation of a Director. This section states that a Director desirous of resigning from a company should give written notice to the company and file form DIR-11 with Registrar of Companies (ROC) along with his resignation letter containing detailed reasons for the resignation within thirty (30) days of resignation. The form can be filed after 30 days also by paying late fee to the ROC.
Please note that the resignation letter/notice should be sent to the registered office address of the company through Registered Post / Speed Post (No courier). The acknowledgment receipt of the post should be retained by the Director since it will be attached with form DIR-11.
We suggest you to send the resignation letter by email also to give proper intimation to the company. This shall help you in case of any dispute with the Company in future.
When will the resignation of a Director take effect?
Resignation of a Director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the Director in the notice, whichever is later.
What will be the liabilities of a Director after resignation?
A Director shall not be liable for affairs of the company conducted or any offence occurred after the date of resignation. However, the Director shall continue to be liable even after his resignation for the offences which occurred during his tenure.
Is a company required to file a form with the Registrar of Companies?
Yes, the company is required to file form DIR-12 with the ROC along with relevant documents within 30 days from the date of resignation of a Director. If the company fails to do so, the company shall be liable to pay late fee and penal charges. Non-filing of the form DIR-12 shall not make Director liable for affairs of the company post-resignation date.
When a Director files form DIR-11 for intimating about his resignation before the company files Form DIR-12, an email by ROC shall be sent to the company for filing the Form DIR-12 and the status of the Director in the company will be changed to ‘Resigned’ against the selected designation.
Things to Remember
- The resignation letter of a director must be addressed to the Board of directors of the Company.
Resignation letter addressed to a third party shall have no effect. [Registrar of Companies v Orissa Paper Products Ltd. (1988) 63 Comp Cas 460 (Ori)] - Unless mentioned in the Article of Association of a company and/or in the resignation letter itself, acceptance of the resignation by the Board of Directors shall not be required. In other words, resignation by a Director is not dependent upon its acceptance by Board of Directors.
- Companies (Amendment) Act, 2017 has made it optional for the Director to forward a copy of resignation to the Registrar of Companies by amending the proviso to section 168(1). In other words, filing Form DIR-11 with the registrar is optional now. Therefore, in order to resign from a Company, filing a letter of resignation is sufficient.
- Section 168(2) provides that the resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later.
- Resigning from the office of Director shall not relieve the Director from any accountability or other liability which he may have incurred while in office.
- Once a director has given a notice of resignation, he cannot withdraw it except with the consent of the company properly considered by the
directors. - A Director who has resigned would not be liable for anything that happens after his resignation.
