Resigning as a director...advice please!
Discussion
Any directors or legal experts here who can confirm something for me…?
My wife and a business partner formed a limited company last November. At the time they agreed that if one should want to leave at any time, the other would be OK with this…
Anyway, after a hard first year, my wife has decided that she wants out. 2 reasons really, firstly, she is fed up with the industry (recruitment) and secondly the working relationship with her business partner is not really working out.
A good opportunity to move out of the industry and into a far more rewarding position (working for a children’s charity) has arisen. She has decided to take it and will be resigning as a director next week. The business consists only of the 2 directors. They work from home offices so there are really no assets as such.
Her business partner found out about her plans on the day that they had a meeting scheduled at which my wife was to break the news, but before the meeting. She seriously threw her teddy out of the pram and has refused to respond to repeated requests to meet and discuss the way forward. (this was a week ago) Options being A: a handover of everything to the one remaining director, or B: to wind the business up. There is no way that my wife wishes to force option B if this is not the wish of the remaining director, but she may not wish to continue on her own as trading is slow at the moment.
To be honest, the remaining director, based on past form, is not too hot on administration (it was my wife who dealt with all accounts, tax, banking etc) If she continues on her own, we do not want to find my wife held liable for something down the line as a result of a cock-up after she has left. For example, there is a tax account with cash sitting in it to pay forthcoming tax and VAT liabilities. Suppose that between the time that my wife resigns and the bill coming in, the remaining director blows the cash and fails to pay the tax bill, does my wife get a tax man knocking on the door?
My wife wants to finalise things one way or the other soon…if she just resigns and hands all business materials, information etc over to the remaining director, can she just walk away with no future liabilities? She has offered to waive all rights to monies owed to her by the business when she does this (about £1500) as a gesture of good will.
Thanks in advance
Jon H
My wife and a business partner formed a limited company last November. At the time they agreed that if one should want to leave at any time, the other would be OK with this…
Anyway, after a hard first year, my wife has decided that she wants out. 2 reasons really, firstly, she is fed up with the industry (recruitment) and secondly the working relationship with her business partner is not really working out.
A good opportunity to move out of the industry and into a far more rewarding position (working for a children’s charity) has arisen. She has decided to take it and will be resigning as a director next week. The business consists only of the 2 directors. They work from home offices so there are really no assets as such.
Her business partner found out about her plans on the day that they had a meeting scheduled at which my wife was to break the news, but before the meeting. She seriously threw her teddy out of the pram and has refused to respond to repeated requests to meet and discuss the way forward. (this was a week ago) Options being A: a handover of everything to the one remaining director, or B: to wind the business up. There is no way that my wife wishes to force option B if this is not the wish of the remaining director, but she may not wish to continue on her own as trading is slow at the moment.
To be honest, the remaining director, based on past form, is not too hot on administration (it was my wife who dealt with all accounts, tax, banking etc) If she continues on her own, we do not want to find my wife held liable for something down the line as a result of a cock-up after she has left. For example, there is a tax account with cash sitting in it to pay forthcoming tax and VAT liabilities. Suppose that between the time that my wife resigns and the bill coming in, the remaining director blows the cash and fails to pay the tax bill, does my wife get a tax man knocking on the door?
My wife wants to finalise things one way or the other soon…if she just resigns and hands all business materials, information etc over to the remaining director, can she just walk away with no future liabilities? She has offered to waive all rights to monies owed to her by the business when she does this (about £1500) as a gesture of good will.
Thanks in advance
Jon H
Can't really offer any advice save that my solicitors are brilliant (if not cheap) on company law. www.nash.co.uk might be worth giving them a call and speak to Austin Blackburn. He advised me on the legalities of buying my business and is not a gobledegook speaker either.
Either way get some legal advice quick from a solicitor who specialises in company law.
Either way get some legal advice quick from a solicitor who specialises in company law.
This can be a potentially complex procedure and you really need professional guidance. What's the situation with shares? What's the business worth? Has she secured property against business loans/overdrafts etc.
In theory, if the company was set up properly, then there will be a pre-agreed procedure outlined in the Articles which should be followed and will then be legal.
In theory, if the company was set up properly, then there will be a pre-agreed procedure outlined in the Articles which should be followed and will then be legal.
steviebee said:
This can be a potentially complex procedure and you really need professional guidance. What's the situation with shares? What's the business worth? Has she secured property against business loans/overdrafts etc.
In theory, if the company was set up properly, then there will be a pre-agreed procedure outlined in the Articles which should be followed and will then be legal.
In theory, if the company was set up properly, then there will be a pre-agreed procedure outlined in the Articles which should be followed and will then be legal.
The business is probably not worth much at all...There was no capital put in by either party when they started up. (basically, they were working together in a branch of a recruitment agency which was closed down, so they decided to go it alone) They both work from home using computers they already had and have been financing day to day expenses out ouf their own pockets, with the intention of reclaiming these expenses when the business is on a firm footing. Any revenue has tax deducted and put in a tax account, then they split the rest 50/50 until in a position to start paying themselves regular saleries. They have not been able to pay themselves for 3 months. There is money in the tax account and that is about the only asset, though of course, HM Treasury will be wanting that at some point.
The company was set up using a company formation service on line. Each director currently has 1 share with a notional value of £1.00
I would hope that Mrs H could just hand over her resignation and walk away without incurring further cost...
Jon H
Resigning as a director is a simple form to companies house - however she will still have directors responsibilities up to the point until she leaves so needs something (set of accounts) to prove the companies liabilities at that point in case it all goes tits up shortly after. If her fellow director is as bad as you make out its probably well worth the money to pay a professional to sort this out properly.
The technicalities of resigning as a director are fairly straightforward. All that needs to be done is that a Companies House Form 288 needs to be completed and submitted.
However, there may be more to the resignation than simply notifying Companies House.
Is the company registered for PAYE? Did your wife draw a salary as a director. If the answer to either of these is yes, then the company (as an employer) needs to issue a P45 to your wife as she will cease employment with the company once she resigns as a director.
As the directors seem to be paying the bulk of the company's expenses out of their own pockets, does the company currently owe any money to your wife in the form of unclaimed reimbursemnt of expenses? If it does, will she want the company to refund her these monies before she goes?
Does the company owe any money to your wife for any other reasons (capital purchases etc).
Is your wife the Company Secretary? If she is, she will probably want to resign that position too.
As she is a shareholder, what does she plan to do with the share she holds. Does she plan to sell it? If so, to whom and for how much?
However, there may be more to the resignation than simply notifying Companies House.
Is the company registered for PAYE? Did your wife draw a salary as a director. If the answer to either of these is yes, then the company (as an employer) needs to issue a P45 to your wife as she will cease employment with the company once she resigns as a director.
As the directors seem to be paying the bulk of the company's expenses out of their own pockets, does the company currently owe any money to your wife in the form of unclaimed reimbursemnt of expenses? If it does, will she want the company to refund her these monies before she goes?
Does the company owe any money to your wife for any other reasons (capital purchases etc).
Is your wife the Company Secretary? If she is, she will probably want to resign that position too.
As she is a shareholder, what does she plan to do with the share she holds. Does she plan to sell it? If so, to whom and for how much?
I'd be careful here - did your wife sign any personal guarantees? Resigning as a director is straightforward enough on paper - it's an E something or other form from companies house, but she needs to extricate herself from the finances with the bank, IR etc as effectively as she can. I would get some legal advice, or at the very least go and see a good accountant. Could be the best £200 you've ever spent. Being a Director of a Ltd company is an onerous business, as you can be contacted by the DTI for up to 3 years after a company goes into receivership if the company goes under with the remaining director and they suspect it was trading insolvently. Trust me, it's not a meeting she wants to have!
Get some professional advice.
Get some professional advice.
No.
Small companies are allowed to have only one director (although the Secretary needs to be someone else in these situations).
If a Secretary resigns, it is always essential to find a replacement as all companies need to have a Secretary.
There is new legislation which will be coming in "soon" which will do away with the requirement for a Company Secretary. This "New" legislation was drafted in 1999 but has been put on the back burner so long that some of the amendments proposed have had to be themselves amended as subsequent changes to law have rendered them unecessary.
Small companies are allowed to have only one director (although the Secretary needs to be someone else in these situations).
If a Secretary resigns, it is always essential to find a replacement as all companies need to have a Secretary.
There is new legislation which will be coming in "soon" which will do away with the requirement for a Company Secretary. This "New" legislation was drafted in 1999 but has been put on the back burner so long that some of the amendments proposed have had to be themselves amended as subsequent changes to law have rendered them unecessary.
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