Company Without Director: What happens if a director resigns?

Company Without Director: What happens if a director resigns?

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Written by Alan Davidson

 
Alan Davidson is a Chartered Accountant, director and founder of Pentins Business Advisers, entrepreneur and author of the Amazon best-seller “Achieve Your Business Vision”. With over 25 years of helping businesses succeed, Alan knows how to build a business with real value, while avoiding costly mistakes.
 

In some circumstances, a company can be left with no directors. This can happen for example if a sole director chooses to resign from the business, or if all directors are removed from office by the shareholders.

Companies Act 2006 states that a private limited company must have at least one director. A public limited company must have at least two. If a company does not meet these criteria, it will be in direct breach of legislation.

What happens to a company without director

When a sole director resigns, Companies House will inform the company that it must appoint a new director, and typically give a deadline. If the company fails to do this, the company will be struck off. Any assets will be auctioned or become bona vacantia.

If a company is left without directors, a shareholder can request a general meeting to appoint new director(s). If none of the shareholders have the authority to call a general meeting, they can send an application to the Court who can order the meeting.

Consequences for the director

A sole director is actually able to resign as a director, leaving the company with all the consequences that might follow, without being in breach of their duties to the company. Some would however consider it immoral for a director to simply resign, as the company’s reputation and financial situation could be compromised. Some companies also have legal clauses in place to ensure that a sole director is unable to leave until a replacement is found to prevent this situation.

It is more common for a replacement director to be found before the resignation is finalised. When a sole director wishes to resign, they typically inform any other shareholders, or find a replacement themselves. If the sole director is also the sole shareholder, they can either choose to sell the business, or to close it down. You can read more about closing a limited company on the government’s websites.

It’s worth noting that there could be consequences for resigning from the business, typically outlined in a Shareholders’ Agreement or similar document. You can learn more about this in our guide to resign as a director.

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