Can a director resign from a company in liquidation?

A company on the brink of liquidation or undergoing liquidation proceedings can impact several parties, namely employees, shareholders and directors.

Therefore, it’s not surprising for directors to explore other options, even before the company has been dissolved.

However, the situation raises the question can a director resign from a company in liquidation?

This article delves into that issue and further examines the responsibilities of a company director under these circumstances.

Can a director resign from a company in liquidation?

The short answer to the question ‘Can a director resign from a company in liquidation?’ is yes.

However, it’s not as simple as resigning from any other position at a company.

Due to the nature of their status, company directors are subject to a rigorous procedure to

terminate their appointment.  This includes completing forms and submitting them to Companies House as well as informing fellow directors and shareholders of their intention to resign.

Once they’ve undergone the process to end their appointment, they’re no longer a director of the company.

Therefore, they can no longer present themselves as a representative of the company or execute duties on the company’s behalf in this capacity.

Despite their resignation, it doesn’t immediately end their responsibilities to a company undergoing liquidation.

Company directors, including former directors who’ve recently ended their appointment, still have an obligation to cooperate with the appointed liquidator in executing the liquidation process.

These duties may include transferring company records, attending meetings and interviews, and facilitating the sale of company assets.

Implications of director resignations during liquidation

Furthermore, though it’s true that a director can resign from a company in liquidation, resignation itself will not absolve them of personal liabilities they owe, or previously owed, to the company.

For example, if a former company director owes any debts to the company, they still have an obligation to repay them.

Likewise, if they failed to meet their fiduciary duty to the company or committed any wrongdoing during their tenure as company director, they can still be held responsible.

It’s in fact the appointed insolvency practitioner’s job to hold them accountable, including starting legal action, as they now control the company during liquidation proceedings.

Another pertinent question for anyone considering ‘Can a director resign from a company in liquidation?’ is whether liquidating an existing company will hinder them from starting a new one in the future.

The answer is no.

Generally, a director leaving a company under liquidation wouldn’t have to worry about being able to start a new one.

However, this decision comes with some restrictions on the naming of the new company and the new company’s tax situation.

On the other hand, if there’s evidence of misconduct on the part of the company director, it can disqualify them from becoming a director at another company.

Expert guidance for directors facing liquidation

If you’re a company director curious about your role during liquidation, the best course of action is to consult an experienced insolvency practitioner who can explain the process and permit you to make an informed decision.

Irwin Insolvency has 25 years’ experience streamlining the liquidation process for its clients.

For more information, contact us by telephone at 0800 254 5122 or by email at mail@irwinuk.net