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Having a company director resign is not a simple process. When a company director resigns, the process is not as simple as when a regular employee resigns. There are restrictions, rules, and regulations to follow before a director may submit one’s resignation letter. 

In this article, we will be discussing how to resign as a company director and the process that a company goes through when a director resigns. 

 

What Happens When A Company Director Resigns?

company director

The process of resigning for a company director is not as easy as when a regular employee decides to resign from their position. The position as a director plays a huge role in every company. Therefore, there are certain restrictions and rules to follow before a company director could submit their letter of resignation. 

 

Restrictions By Law

restrictions by corporate law

 

According to the Companies Act 2016 Malaysia, there are a few rules to follow before a resignation letter from a director is approved. There has to be at least one director assigned in a company. Hence, the current director may not be approved of their resignation unless there is at least one other director in the company.

There has to be at least one director who originally resides in Malaysia. The director could not be someone who is intended to be a substitute. In a private company, there has to be at least one director that fulfills either of these requirements. 

corporate terms and conditions

If there are two directors, one who is residing overseas and one who is residing in Malaysia, the director who is resided in Malaysia cannot resign as there would be no resident director left in the company. 

If a company has only one director left and the director has an intention to resign. The director may not declare his resignation until the company has appointed a new director. Within one company there has to be at least one resident director at all times. 

 

Resignation Process

submit forms

Firstly, one must inform the company secretary that a company director would like to submit their resignation. Then, a few forms must be filed. The following forms are Form 49, a letter of resignation, and the board resolution. 

The board of directors must then decide whether or not to approve the resignation. After the approval by the board, the secretary would then submit Form 49 and the board resolution to SSM. 

SSM would not be able to approve any resignation letter. All directors who are resigning must submit their resignation through the company secretary. 

board approval

By law, board approval is not required. However, discussion within the board members and seeking board approval is considered a common practice in companies as the resignation of a director might affect the company’s future. 

In rare cases where a company secretary is uncontactable, one may contact the SSM for further instructions and guidance. 

 

Director’s Liabilities

director's liabilities

 

A director has numerous responsibilities in a company. Before a company director resigns, one must ensure that they have completed all necessary duties and that their resignation is not submitted with the intent to run away from an issue that would cause the company to suffer losses. 

company losses

If a director has resigned with ill intent, the director might be held accountable for the company’s loss. The resignee could be held liable for the company’s loss if they are still a part of the company and benefit from the company’s profit. 

In the case of CTI Leather Sdn Bhd v Hoe Joo @ Khoo Hock Tat & Ors (2011) 8 MLJ 521 the resignee still held a role in the company. Hence, the court stated that the defendant was still considered a director and is liable for the company’s losses despite being resigned. 

 

Conclusion

corporate lawyer

It takes a lot of preparation when a company director resigns. Before resigning, one must be aware of the corporate laws pertaining to the resignation of a company director. If you are ever in doubt of the current corporate law, it is advisable to consult a professional lawyer. 

Consulting a corporate lawyer would ensure that your resignation goes smoothly and abides by corporate law. Sim & Rahman would be able to guide you through the legal process and provide you with professional legal advice to your needs. Contact Sim & Rahman to make an appointment now!