What happens when one of two directors resigns?

Discussion in 'Askaboutbusiness' started by Brendan Burgess, Aug 15, 2010.

  1. Brendan Burgess

    Brendan Burgess Founder

    A company must have two directors.

    What happens if one director decides to resign, leaving the company with only one director. O.K., they can ask a friend to become a director, but let's say that the future of the business is uncertain and no one wants to become a director or the remaining director does not want to put a friend or relative at risk?
  2. MandaC

    MandaC Frequent Poster

    Resigning Directors

    It is an awkward one.

    We all know a company cannot exist with one Director. Section 174 of the Companies Act 1963 states that "every company shall have at least two Directors."

    Usually the position in cases like these it is where the two directors have "fallen out" and the company refuses to file the B10, which, of course the resigning Director cannot file himself (one signature). The B10 is rejected not because its validity is questioned, but rather that it is not the Company notifying the Registrar of Companies which is a requirement under Section 195 of the Companies Act. The Director wanting to resign then has to go down the B69 route.

    I do not think this is the case in Brendan's scenario?

    The other side of the coin is that one of the consequences of a director’s resignation may be to leave the company with fewer directors than the statutory minimum does not legally effect the validity of the resignation. The last two (last or second last) directors of the company do not have any less of a legal entitlement to resign from office than those directors who opted to resign sooner. The validity of the appointment or resignation of a director depends on what is contained within with the company’s articles of association and not from the notice of the appointment or resignation being registered in the CRO.

    Where a company has only one remaining director such a person ordinarily lacks power to do anything other than if the articles permit, to co-opt an additional director or directors, or to convene a general meeting of the company.

    I was aware of a case where there were five directors and they all wanted to resign together. The opinion from the ODCE was that the proper course of action was for those wishing to resign to assist in the convening of an EGM of the company for the purpose of appointing new directors prior to their intended resignation, given the fact that a company having one or no directors can of itself provide a basis on which the company would end up being struck off the Register.

    In reality and on a day to day basis, the CRO will not accept a B10 resignation form that will leave a Company with one Director. It will reject from the system and be returned to the company unless the new appointment is filed effective from the same date.

    That's been my experience of it. Someone else may have experienced something different.