RESIGNATION OF DIRECTOR

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2010 How does a director resign from the board in a Pvt. Ltd.,if the Board fails to accepts his resignation ?

CA Sanat Pyne

CA Sanat Pyne (Expert)
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24 September 2010 There is no provisions in the Companies Act, relating to the resignation of his office by a director of a company. If there is any provision in the articles of the company giving the right to a direction to resign at any time, the resignation will take affect without any need for its acceptance by the Board. Where a director is elected or has contracted to act for a fix period, his resignation before the expiration of the period may make him liable for damages, unless the articles permits such resignation. In the absence of a provision in respect of resignation under the Act or under the articles of the company, the resignation tendered by a director unequivocally in writing shall take effect from the time when such resignation is tendered. It is advisable that the resignation should be in writing and also indicate the time when it is to take effect. The Directors cannot refuse the resignation of a co-director unless such a provision is there in the Articles of Association of Company.

Ajay Mishra

Ajay Mishra (Expert)
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24 September 2010 A. Mode and Consequences of Resignation

I. There is no provision in the articles giving specific rights to a director to resign at any time; the resignation will take effect without any need for acceptance by the board or the company in the general meeting. In the absence of any such provision relating to the resignation in the memorandum or articles of association ,it is settled that resignation once made takes effect immediately when the intention to resign is made clear.

II. Ordinary rule as to resignation by an officer, director or Agent must be followed, namely
a. Intimation by notice either to the company or the board and acceptance of the same by them.
b. Any form of resignation is valid whether oral or written, and is sufficient, provided the intention to resign is clear.
c.Resignation is advisable in writing provided it indicates the time when it is to take effect and serve in record of reference in case of nay controversy.

III. The net result of the above analysis is that a director, who has submitted his resignation, will be deemed to have resigned from the date of his resignation, without prejudice to his liabilities and obligations which had occurred up to that date and which he cannot evade by severing his connection with the company.

B. Resignation may be unilateral or bilateral

I. The act of relinquishment may take different forms or assume unilateral or bilateral character, depending on the nature of the office and the conditions governing it.

II. If the act of relinquishment is of UNILATERAL CHARACTER, it comes into effect when such act indicating the intention to relinquish the office is communicated to the competent authority. The authority to which the act of relinquishment is communicated is not required to take any action and the relinquishment takes effect from the date of such communication where the resignation is intended to operate in praesenti.

III. Where the act of relinquishment is of BILATERAL CHARACTER, the communication of the relinquishment, by itself, would not be sufficient to result into relinquishment of the office and some action is required to be taken as such communication of the intention to relinquish.

IV. The nature of the office and the conditions governing it shall be the determining factor for the act of relinquishment, whether Unilateral or bilateral.

C. Intimation to the Registrar

I. The Companies Act under section 302(2) casts a legal obligation on the company to inform the registrar of the companies by filling form no.32 giving particulars of changes, if any, in the office of director. If such a form is filed with the registrar of companies it is a proof of a director ceasing to be a director but, it is not an act to be complied with in order to make resignation valid.

II. The board of directors to whom the act of relinquishment is communicated is not required to take any action by way of accepting resignation and, therefore the relinquishment takes effect from the date of such communication where the resignation is intended to operate in praesenti.

III. In order to make the resignation effective, it is not necessary that the board should accept it.

IV. It is clear that the filling in of the form no .32 and the giving of the due intimation and information to the registrar of companies is the duty of the company secretary or director and not of the individual director resigning from the office.

Regards

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