written by khatabook | November 15, 2022

A Detailed Guide On Resignation of Directors From Companies

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Table of Content


Resigning from a director position requires a letter of resignation as a formal statement of your intent to leave. As you depart from the company, this letter will help you maintain a healthy relationship with the organisation. You can make a more seamless transition into a new career by learning how to write a resignation letter. This article aims to define a director resignation letter, provide a template and procedure for the resignation of a director in a private limited company, and provide examples for you to use when writing your own.

Did You Know? As of Sep 2022, 50% of Unitech's Board Directors have resigned from the company. Among those who left were Renu Sud Karnad and Balasubramanyam Sriram.

Resignation of Director

The Companies (Qualifications and Appointments of Directors) Rules, 2014, along with Section 168 of the Companies Act, 2013, prescribe the detailed procedures for resignations.

If a director resigns, the company must call a Board Meeting immediately. Additionally, the Board shall authorise any director to notify the Registrar of Companies of their resignation as a director. It is also possible for the Director to voluntarily submit their resignation to the Registrar of Companies. It should include detailed information regarding such concessions in the Board's report, which will display at the next general meeting.

Effective Date of Resignation

Resignation shall become effective on the earlier of the below given two dates:

  • A company receives the notice on the date of receipt or
  • The date specified in the statement by the Director.

The company will consider the later date to be the effective date between the two dates above.

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Resignation Duty of the Company

The company shall submit an application in Form DIR-12 to the Registrar of Companies within 30 days after taking note of the resignation of a director. The company will remove the board directors' names once they receive the approval form and the register of directors is updated.

Resigning Director's Responsibility After Resignation

Within 30 days of his resignation, the resigning Director may also voluntarily notify the Registrar of Companies of his resignation in Form DIR-11, along with his reasons for leaving.   

Foreign Director Resignation

The resigning Director can authorise a practising company secretary, chartered accountant, cost accountant, or other resident directors to sign Form DIR-11 on his behalf. After signing, they should file it on his behalf, informing the reasons for their resignation if the person is a foreign director. The company has already applied for DIR-12.

Directors Liability After Resignation

A director's liability after resigning is as follows:

As soon as the Director leaves, they are no longer responsible for any actions taken in the company during that time. If an offence occurs after his resignation, his resignation letter will suffice to discharge him of liability. If a wrongful act occurs during the Director's role in the company, they will be held liable. 

Consequences When Directors Resign simultaneously

The promoter's or government's responsibility is to appoint new directors if all directors resign simultaneously. Until the general meeting appoints directors, these directors shall hold office.

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Procedure for Director's Resignation

A director can resign from their post by providing notice in writing to the board of directors of the company. The procedure is as follows:

Step 1: Notice of Resignation

Resigning directors must provide the company with a notice of resignation stating their reasons for resignation and the date of their resignation.

Step 2: Arrange for a Board Meeting Immediately

The Board should call a meeting following receipt of the resignation notice and pass a resolution agreeing to take note of the resignation and appointing a director to file the return with the Registrar of Companies.

Step 3: The Registrar of Companies (RoC) Recieving Return of Resignation 

Form DIR-12, along with a copy of the Board Resolution and resignation letter, must be filed with the registrar within 30 days of resignation. If the ROC approves Form DIR-12, then the resigned Director's details will be removed from the MCA portal for that company once Form DIR-12 is approved. 

Step 4: Directors filing Return of Resignation 

Directors resigning may submit Form DIR-11 to the Registrar of Companies within 30 days of their resignation date, along with their reasons for leaving.

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Director’s Resignation Letter

Directors' resignation letters state their intent to leave their positions as directors of boards, companies, or other organisations. A letter setting a final service date clarifies your intention to step down as Director. By giving your organisation time to find a replacement before you leave, you can maintain a positive professional relationship with them.

The resignation letter is an excellent opportunity to explain your reasons for leaving and express gratitude for the opportunities the position provided. A paragraph may address any potential legal ramifications associated with the role of the Director. If you would like a lawyer to review this paragraph, please do so. In addition, you may offer to recruit or train a replacement to help with the transition. Additionally, you can provide the organisation with your contact information so they can contact you in the future.

Director’s  Resignation Letter Examples

Resignation letters for directors may vary depending on their position and reason for quitting. To guide your resignation letter writing, below is an example based on your resignation reason:

Suppose you are resigning on a personal basis, then the letter would be,

You are free to explain why you are resigning in a resignation letter based on personal reasons. Doing so may help maintain a strong relationship with other organisation members after you leave. It is acceptable to explain that you are going due to private matters if you prefer to keep your reasons confidential. The former option looks like this:

Date: ———— 

To 

The Board of Directors 

[Name of the Company] [Address———-] 

Sub: Resignation Letter

Dear Sir/Madam, I, ———————- R/o —————————————————–,Unfortunately, I must step down from my corporate directing post due to confidential and unavoidable circumstances. Please accept this letter as my resignation and let go of my duties. Please confirm receipt of this letter and go through the necessary procedures at the Registrar of Companies’ office.. 

Thanking You, 

Yours Faithfully 

Name of Director 

DIN: ————-


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Company's Director's Resignation Acceptance Letter

Below is a format of the Resignation Acceptance Letter by the company.

Date, month, and year:

To

--------- (Name of the resigned Director)

Address.

Subject: Resignation Acknowledgement

Dear Sir,

I was referring to your resignation letter dated ---------. At the Board meeting on ------------, the Board approved your resignation effective from ---------.

You have been a pleasure to work with, and I enjoyed having your support during your time with the company. Our best wishes go out to you in your future endeavours.

Thanking you,

Yours Faithful,

For --------- Company,

Director.

Conclusion

Now, you may have a clear view of how a director resignation letter has to be and how the company will accept and proceed with the director resignation letter. A director could resign from his office by submitting a notice in writing to the Board of Directors of the company.

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FAQs

Q: Upon the Director's resignation, can he be reappointed?

Ans:

Having been removed from the Board once, a company cannot appoint a director.

Q: Does a Director still receive compensation if a company removes him or if he resigns?

Ans:

It is his right to receive the compensation damages he is entitled to even after being removed from the company.

Q: What are the grounds for removing a Director?

Ans:

Vacancies in the Director's Office can occur due to death, statute, or by the provisions of the AOA or the shareholder agreement.

Q: Without the consent of the Director, can the company remove him?

Ans:

Under certain circumstances, it is possible to remove a company's Director without consent.

Q: Is the removal of the Director valid after his resignation?

Ans:

It is unnecessary to file the ordinary resolution passed with the registry.

Q: What is the process for removing a Director from a company after his resignation?

Ans:

By adopting a resolution addressed to the Director, a corporation can revoke its right to remove a director. Directors will receive a seven-day meeting notice from the Board.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.