Resignation of directors

Resignation of directors - it is a unilateral legal act performed by one of the members of the board of directors in the company. It is fully binding and does not require the consent of the company to resign. However, after the official notice is given, it is not possible to withdraw the declaration without the company's consent. In addition, the resignation does not hold the director liable for decisions taken before the resignation, personal commitments made to the company, acting as a natural person or joint and several liability for the company's obligations together with other directors. In the event that the entire board of directors resigns, shareholders are required to immediately appoint a new board of directors to deal with all material matters of the company.

Post-resignation liabilities

After leaving office, the director shall continue to be responsible for all debts of the company arising during his term of office. In particular, these are trade liabilities, tax liabilities or social security liabilities. It should be remembered, however, that a given liability is a joint and several liability, which it bears only when the enforcement of the company's assets proves ineffective. The only exception in which he is able to exclude his liability is the fact that, at the time the debt existed, there was no chance that he could file a petition for bankruptcy. This is the so-called exclusionary premise, which, however, is difficult to apply in practice .

It is worth noting that joint and several liability boils down to the fact that the director is responsible for the company's liabilities with all his or her assets, without any limitations. Therefore, it is rare for shareholders of limited liability companies to sit on the board of directors of companies.

Post-resignation duties

Each director will be required to maintain appropriate confidentiality at the end of his or her relationship with the company. This is due to the fact that at the time of the transition, for example, to a competitor, the competitor could have disclosed a business secret that belonged to its predecessor. The following general clauses are therefore formulated:

• Prohibit competitive activities and transactionswhere a conflict of interest may arise;
• Return of all tangible and intangible assets transferred by the company;
• Giving access cards to all points where sensitive company data are processed.

It is worth noting that it happens very often that the resignation of a director may mean that the company obtains valuable information. This means that he is able to point out its strengths and weaknesses. In particular, the weak ones, which could be the reason for his resignation. In this case, as a faithful former manager, he or she should provide his or her successors with an appropriate feedback to be used by them. As indicated in the literature, if the situation in the company was bad (and that was the reason for the resignation), directors are more willing to share their thoughts than they would have left on neutral or positive terms .

Footnotes

Resignation of directors — recommended articles

Approval authority — Disclosure requirements — Fiduciary bond — Liabilities of directors — Assignment of claims — Special power of attorney — Accident policy — Dissenters Rights — Limitation of liability

References

• Bar-Hava K., Gu F., Lev B. (2013), Busy Directors are detrimental to corporate governance, Working Paper
• Bar-Hava K., Huang S. , Segal B. , Segal D. (2018), Do independent directors tell the truth, the wholetruth, and nothing but the truth when they resign?, Research Collection School Of Accountancy
• Tricker B. (2011), Re-inventing the Limited Liability Company, Corporate Governance: An International Review 19(4)

Author: Maria Wrzaszczak