Can-I-resign-as-a-director-but-keep-my-shares-in-the-company

Resigning as company director: What happens to my shares?

There are numerous reasons why you may wish to resign as a director of your company. However, before doing so, it’s important to think about whether you intend to retain your shares in the company.

The Articles of Association or Shareholders’ Agreement usually outline the procedure for resigning as a director, along with instructions on what to do with your shares.

This is only the initial stage. If you decide to sell your shares, you must reach an agreement with the company regarding their valuation.

 

A Quick Review of the Articles of Association or Shareholders’ Agreement

The Articles of Association outline the company’s operational guidelines, including procedures for situations like director resignation. Likewise, a Shareholders’ Agreement may detail the necessary steps and processes.

The Articles of Agreement may contain a provision regarding a director’s departure, either through resignation or removal, which could specify the actions required concerning your shares.

One option is to sell your shares to other shareholders. However, if there are no specific instructions or if other shareholders are not interested in buying them, you might have the opportunity to hold onto the shares for potential sale at a later time.

 

Should You Hold onto Your Shares or Sell Them?

Financially, it might be advantageous for you to sell your shares, although this depends on several factors, including:

The performance of your company

How well is the company performing? Do you believe it has already reached its peak in trading, or is there still room for growth? If it’s the latter and you can retain your shares, it might be beneficial to wait until the share price increases before selling.

Your right to receive dividends

You should also consider your right to receive dividends if the company is capable of declaring them. Dividend payments could offer valuable additional income for you. However, it’s important to note that there’s no guarantee that the remaining directors will consistently declare dividends in the future.

Is there a possibility that the company will be sold in the future?

Based on your understanding of the company and the intentions of other directors, you might anticipate that the company will be sold in the future. As a shareholder, you would then be entitled to a portion of the proceeds from the sale. Therefore, it would be advisable to retain your shares if feasible.

Do you have any voting rights?

Your shares may grant you the ability to vote on specific company matters in the future, such as operational decisions or dispute resolutions. If your vote holds significance to you or could impact a situation you wish to be part of, retaining your shares is advisable.

What are your future plans?

If you plan to establish a company that could be seen as a competitor, you must ensure there are no limitations in place, such as a non-compete clause.

 

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Resignation and Share Sale: What If You Resign and Sell Your Shares? 

If you opt to sell your shares, reaching an agreeable price for all involved can pose a challenge. Once more, the Articles or Shareholders’ Agreement might simplify this aspect of the process if a specific share valuation method is outlined.

If you’re unable to reach a price agreement with the other directors, you might need to seek assistance from a professional. A financial expert, independent of the company, could help resolve the deadlock regarding share price and facilitate your resignation.

For personalised advice on retaining your shares upon resigning as a director, please reach out to Vanguard Insolvency. As a key division of Begbies Traynor, the UK’s leading professional services consultancy, we can offer the tailored guidance you require during these challenging times. 

We provide complimentary same-day consultations and maintain a wide network of offices across the UK.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.