What needs to be done when your Company Director wants to resign?


The first thing that comes to your mind might be to prepare a resignation letter for your Company Director to sign. Or pass a Board resolution to approve your Company Director’s resignation.

Correction! If your Company Director wishes to resign, it does not require the Board’s approval i.e. the other Directors of your Company cannot disallow the Company Director from leaving by disapproving the resignation.

Unless required by your Company’s Constitution or service agreement between your Company and the relevant Company Director, it suffices when the resigning Director serves a notice of resignation on the Company. A typical constitution provides for directors resigning by giving notice in writing to the company. Hence, your Company is only required to pass a Board resolution to accept the Company Director’s resignation.

What else to check for?

Prior to preparing the Board resolution and resignation letter, you ought to check out a couple of things to make sure your Company complies with the Companies Act and the Company’s Constitution.

This is where our checklist can help you.

We now elaborate further on each point to help you understand what you need to look out for when Mr X resigns as a Director of your Company.

Compliance with provision in Constitution on number of Directors

“Subject to the other provisions of Section 145 of the Companies Act, there shall be at least one Director who is ordinarily resident in Singapore and there shall be a maximum of five Directors.”

If you see a similar provision like this, when Mr X resigns, make sure that your Company still has one Director who is locally resident in Singapore. In addition, if your Company intends to appoint new Director(s) in place of Mr X, make sure the number of Directors will not exceed the maximum threshold stated in the Constitution, which in this case, is five.

Compliance with provision in Constitution on quorum for Board meetings

“The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed is two.”

This is the typical provision in ACRA’s model constitution. When Mr X resigns, make sure that the remaining Directors can still form a quorum for purpose of holding Board meetings. In this instance, you have to ensure that there will be at least two Directors after the resignation of Mr X.

Compliance with Provision in Constitution on Shareholding Qualification for Directors

“A Director need not be a Member and shall not be required to hold any share qualification unless and until otherwise determined by the Company in General Meeting but shall be entitled to attend and speak at General Meetings.”

If this provision exists in your Company’s Constitution, it means that your Directors are not required to hold shares in your Company. On the other hand, if it is stipulated in your Company’s Constitution that a director must be a member, Mr X should not continue to hold shares in your Company when he resigns. You should arrange for Mr X’s shares to be transferred.

Compliance with other Relevant Provisions in Constitution / Shareholders or Joint Venture Agreements

Go through the sections on “Directors” and “Proceedings of Directors” to see if there could be any other requirements which you might need to adhere to in relation to Mr X’s resignation as Director.

In addition, if your Company has entered into any shareholders’ or joint venture agreement, you should also check through such agreements for provisions on Board composition or any other clauses that would require you to take action upon Mr X’s resignation. E.g. it could be stipulated in the agreement that your Company is entitled to a Board seat and hence, you are required to nominate a replacement director in place of Mr X.

Compliance with Companies Act

Section 145 of the Companies Act requires every company to have at least one director who is ordinarily resident in Singapore.

Hence, when Mr X resigns, you must ensure that there must be at least one director who is either a Singapore Citizen, Singapore Permanent Resident or employment pass holder with local residential address in Singapore.

Other Considerations

Other than Board resolution and resignation letter, there could be some other documents which you might need to prepare.

For instance, if Mr X had appointed an alternate director, you will need to prepare documents in relation to the cessation of alternate director. If Mr X is an authorised bank signatory for any of the Company’s corporate bank accounts, you must remember to remove him as a bank signatory. If Mr X is an appointed corporate representative of your Company to attend general meetings or sign member’s resolutions of your Company’s subsidiary(ies), you will need to remove him as a corporate representative too.

Other Actions Required

Of course we do not stop at preparing the necessary documents. After getting the documents signed, there are certain actions you need to take e.g. notifying ACRA, updating statutory records etc. Not only can you use our checklist to guide you every step of the way, SimpliReso also helps you by providing you with the customisable templates. Feel free to check it out – Cessation of Director / Alternate Director.

 


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