Can Directors of a Company simply resign?

Profiler

(apologies if this has been dealt with before)

I was of the understanding that directors simply cannot resign, new directors must be ready to take their place. I would like to know if I can insist that they stay in place until certain conditions are met?

Mod’s I appreciate that this might look like a property issue but my question is in respect of a point of law.

That being said the background to my question is to do with Property Management. My apartment is part of a management company. Of which the current directors are a Director of the Property developer and a Partner of the firm of solicitors who act for the developer.

We received a notice of AGM in which the property management company have stated that the above two mentioned directors have written in wanting to step down. It is worded as follows

“A matter of Company law compliance for the above said company has arisen and must be addressed at the AGM. The two original directors, who were also the developers and solicitors for the development, have sent a letter of resignation to the registered office with their intention of stepping down. Consequently a minimum of two new directors must be appointed at the AGM so the Management Company may continue as a going concern

The letter from the property management agency goes on to imply that if two Shareholders (owners) do not step forward the Management company will have no directors and may therefore be dissolved, become insolvent of assets, company frozen and as a consequence nobody who wishes to sell their apartment will be able to do so and a lack of further services could lead to dilapidation.

Can anyone advise if we as owners can deny the Developer and their Solicitor the right to step down by not putting forward other candidates?

All we want them to do is to deliver on a number of essential development matters. These are, but not limited to, roads that need finishing, Street lighting that needs investigation as to why they break so often and also why the drains over flow and flood so often.

The letter suggests that two new directors must be appointed at the AGM, I believe (and I stand to be corrected on this) that this is not true.

If someone can let me know I would be grateful.

Thanks in advance!

Paulw

The directors can resign. There are no specific reasons to stop this.

Your management company must then hold an EGM and elect two (minimum) new directors.

As for the issues you have with the developer, well, their responsibility to complete issues does not end if they step down as directors, and in fact, from what I can see, this would actually be to your benifit for them to step down and for the unit owners to take control of the management company.

If the developer is not completing tasks, then you can report this to your local planning authority enforcement division.

Jev/N

Paulw wrote: »

Your management company must then hold an EGM and elect two (minimum) new directors.

Under the 1994 EC Regs, you can have a single director company AFAIK

Paulw

Companies Act 1963, Section 174 - Every company shall have at least two directors.

Our man in Havana

You can have a single member company but it must still have two directors.
Single director companies are not allowed.

Directors cannot merely resign. They must be replaced or the CRO will not accept their resignations and they will continue on record as the directors of the company until such time as replacement director are appointed and notified to the CRO. The company cannot continue without directors in the interim between the outgoing directors resigning and new ones being appointed.

As said if new directors cannot be appointed, the company will be wound up causing all manner of problems.

Paulw

From the sound of things, the sitting directors are resigning at an AGM (their letters of resignation are simply letters of notice), where new directors should be elected anyway, as part of the AGM.

As minutes of the AGM, it will be noted that the sitting directors resign. It is then up to the shareholders to elect new directors.

Our man in Havana

And if they don't the current directors will simply wind up the company.

Jev/N

Bond-007 wrote: »

You can have a single member company but it must still have two directors.
Single director companies are not allowed.

D'oh, stupid me!

Paulw

Tester46 wrote: »

Sounds like the OP is asking if the apartment owners can prevent the 2 existing directors from resigning. AFAIK, the directors can only resign in practice if new directors replace them i.e. the last two directors in the company cannot just walk away from it.

The OP would be well advised to discuss this with a solicitor experienced in company law. As it is an apartment complex, check your purchase contracts also - they may have express conditions dealing with the management company e.g. that the apartment owners don't get to vote at the AGM/EGM until such time as the last apartment is sold and the company handed over, etc.

In many apartment complexes, there are also situations where the developer can hand over the development to the management company (shareholders) before all units are sold and the development completed (such as the development I live in). We actually called an EGM and removed the sitting directors (developers).

The directors can resign at an AGM (and in many cases must resign each year), and you cannot stop them (to the best of my knowledge). It is then up to the shareholders to elect new directors. Failure to elect new directors must be recorded in the minutes of the AGM and sent to the CRO. If this happens, you can have some very serious problems.

I don't believe there is a pre-requisite to elect new directors before the sitting directors resign, in fact, I believe that the sitting directors must resign before new directors can be elected.

Yes, if in doubt, consult a solicitor who specialises in company law.

Our man in Havana

I don't believe there is a pre-requisite to elect new directors before the sitting directors resign, in fact, I believe that the sitting directors must resign before new directors can be elected.

Indeed that is correct. But if no new directors are appointed, the CRO will not remove the previous directors from their records. This is where all the problems start.

Tester46

Bond-007 wrote: »

Indeed that is correct. But if no new directors are appointed, the CRO will not remove the previous directors from their records. This is where all the problems start.

Indeed that isn't correct . There is no rule which says the sitting directors have to resign before new directors are appointed. In fact, it is logically (and logistically) wrong to do that as there would be a resulting period of time where there are technically no directors and so no one to appoint the new directors (unless the shareholders do it).

Normal practice is for a board meeting to appoint new directors during the meeting, and for the existing directors to resign immediately afterwards, or at the end of the meeting.

Paulw

Tester46 wrote: »

There is no rule which says the sitting directors have to resign before new directors are appointed.

Normal practice is for a board meeting to appoint new directors during the meeting, and for the existing directors to resign immediately afterwards, or at the end of the meeting.

Neither is there a rule that says that new directors must be elected before the sitting directors resign.

"Normal practice" seems to differ from company to company, since any AGM I've attended has had resignation of sitting directors before election of new directors (or re-election of sitting directors), one directly after the other.

I don't believe that it's actually specified anywhere in the Companies Act.

Tester46

Paulw wrote: »

Neither is there a rule that says that new directors must be elected before the sitting directors resign.

"Normal practice" seems to differ from company to company, since any AGM I've attended has had resignation of sitting directors before election of new directors (or re-election of sitting directors), one directly after the other.

I don't believe that it's actually specified anywhere in the Companies Act.

There is a rule that implies new directors must be appointed before all the old directors resign. Section 174 Companies Act 1963 says that every company must have at least 2 directors. If all the old directors resign before the new directors are appointed, then there is a logical gap where there are no directors for a period of time between the resignation and the appointment - that would breach s174. Of course, that applies where all of the old directors are resigning (which is what the OP said).

I'll readily accept though that this is the kind of academic argument which keeps company lawyers happily engaged in debate for hours, is utterly pointless and provides no benefit whatsoever for the average client .

Regarding the OP's original question, I'd still suggest he talks to a solicitor. Because it is an apartment complex, the answer may well lie in his property documents, rather than in company law i.e. he may already have signed up to covenants in the documents which he might not be aware of, and so might the builder have.

Paulw

Tester46 wrote: »

I'll readily accept though that this is the kind of academic argument which keeps company lawyers happily engaged in debate for hours, is utterly pointless and provides no benefit whatsoever for the average client .

Oh so true.

Tester46 wrote: »

Regarding the OP's original question, I'd still suggest he talks to a solicitor. Because it is an apartment complex, the answer may well lie in his property documents, rather than in company law i.e. he may already have signed up to covenants in the documents which he might not be aware of, and so might the builder have.

With regards to management companies, having practical experience myself, I think it's a very good thing for the OP when the developer stands down and gives control of the management company to the shareholders. This, in no way, reduces the developer's responsibility to complete the development and finish whatever is needed. These things can be followed up, outside of the management company. The local planning authority can be contacted and used. Developers need to put a bond down and this can't be collected until the development is signed off, and meets all planning requirements.

The OP should gladly take control of the management company, and elect shareholders as directors, and then contact the enforcement section of their local planning authority to follow up on any development building issues. That's exactly what we've been doing in our development.

candyman

what does it mean to be a director of a management company?

is there any risks to taking up such a position? does it require insurance?
what are the main tasks you are obliged to do in the role?

alot of questions i know but im just trying to assess the pros and cons of taking up a director position on the board of my management company. It is a residential apartment block.

cheers,

Tom Young

Are all your questions not addressed above!??

Our man in Havana

candyman wrote: »

what does it mean to be a director of a management company?

is there any risks to taking up such a position? does it require insurance?
what are the main tasks you are obliged to do in the role?

alot of questions i know but im just trying to assess the pros and cons of taking up a director position on the board of my management company. It is a residential apartment block.

cheers,

I suggest you download information leaflet number 2 from the cro website.

selous

I became a director of my estate, with 5 others to off the builder who went bang, as we were advised to do by the management company,we took over in Sep 2010, But now it's a nightmare. The accounts have not been done since 2007, bank account is empty, but was frozen by receiver (of development) and now the manag co wants up to E40k because it says it wasnt paid previously, the receiver says it was, but managment company wont release any accounts of debitors, which were shafted by the builder, now we have been told WE are lible for them, there is no money anywhere, because the estate is in such a state of disrepair and only 6yr old, we cant even get public liability insurance because the area has been deemed to dangerous, How do i resign as a director from this mess? thanks in advance.

Our man in Havana

You should have never became a director in the first case. You can resign now but make sure that the CRO is notified.

You are not liable for any of these monies. The company is liable not you as a director.

Seek proper legal advice.

selous

Would you believe it was a barrister that advised us to go and do it, as it would be for the best. and us innocents thought it would start anew with us, not realising that the all the debts the builder left would be ours. The management company was struck off but the receiver got it back on again, because there are over 40 vacant dewllings that he has to shift, and cant do it without it. the place is a nightmare, sewage pump breaks, damp in wall's rising and falling, plumbing is useless, top apartment leaks into bottom one, steps are falling apart, wind and rain comes thru the doors and windows (SNIP wanted E60 per call out per apartment) Plaster is falling off the outside. Yet with all our complaints to everybody, nothing can or is being done, because we are a private estate. we even got in touch with our mortgage providers, and they more or less said "Tough" Some residents have got engineer's reports, which say "not fit for purpose" It's unreal for a 6 year old estate. although mine is only 3 years old.
Thanks for the advice.