Resignation of Director of Company

Directors are an integral part of any company, playing vital roles in decision-making and ensuring smooth functioning of the organization. However, circumstances may arise where a director may need to resign from their position. In India, the Companies Act 2013 lays down specific procedures to be followed in case of resignation of a director. It is important for both the company and the director to understand and comply with these guidelines to avoid any legal complications that may arise in the future. In this blog post, we will explore the process of resignation of a director of a company in India, highlighting key steps and considerations to keep in mind.

I. Introduction

Definition and importance of resignation of a director from a company in India

Resignation of a director from a company in India refers to the voluntary removal of a highly placed official from their position. This resignation could be due to various reasons, such as personal or professional conflicts, health issues, or better career prospects. The resignation process is governed by The Companies Act 2013 and The Companies (Qualifications and Appointments of Directors) Rules 2014. Directors should follow the protocol set out in these laws to resign from their post effectively.


The resignation of a director is an important event for companies in India as it can significantly affect their operations and reputation. It is essential to maintain a harmonious relationship between the director and the company. As per The Companies Act 2013, a resignation statement must be submitted to the company formally by the director to ensure a seamless transition. The resignation letter helps maintain the company’s goodwill and ensures that the outgoing director’s reputation is protected. In addition, a resignation letter can be used as evidence if any legal issues arise in the future.

When a director resigns from a company, they are required to perform certain obligations, including informing the Board of Directors, submitting a notice of resignation in the Form DIR-11, and continuing to discharge their duties until the effective date of cessation. The Board must pass a resolution accepting the resignation and the Registrar of Companies must be notified within thirty days of receiving the resignation letter. Filing the resignation notice and necessary documents on time avoids complications with the Ministry of Corporate Affairs.

In summary, the resignation of a director is a significant event that could have an impact on the company’s reputation and operations. Therefore, proper procedures should be followed to ensure a smooth transition and maintain a good relationship between the director, the company, and its shareholders. 

II. Procedure for Resignation of Director

Director’s notice of resignation to the company

When a Director decides to resign from a company, they must first give notice to the Board of Directors in writing. This notice can be sent through email or letter and should include the effective date of the resignation. The Director must also attach a copy of the resignation letter and provide detailed reasons for the resignation. The Board of Directors should then pass a resolution accepting the resignation and draft the minutes of the meeting. Within 30 days of receiving the resignation letter, the company is required to intimate the Registrar of Companies (ROC) by filing the requisite form DIR-12 along with evidence of cessation, such as a board resolution or acceptance letter.

It is also mandatory for the Director to file a copy of the resignation letter with the ROC within 30 days of the resignation. Additionally, the Board of Directors is required to mention the resignation in the Director’s report of the annual general meeting and reflect it on the company website.

“A Director may resign from his office by giving of a notice in writing to the company and the Board shall, upon receipt of such notice, take note of the same and the company shall intimate the Registrar thereof.” – Meerad Legal Services.
It is important for the Director to fulfill these obligations and follow the correct procedure, as they may be liable for any offenses that occurred during their tenure even after resignation. 

Obligations of the Director who is resigning from the post

When a director resigns from their position in a company, they have certain obligations that they must fulfill before officially stepping down. One of the primary responsibilities of a resigning director is to submit a notice of resignation to the board of directors of the company. This notice can be in the form of a letter, email, or other written communication. The resigning director must also provide a detailed reason for their resignation.

According to the Companies Act, 2013, a Director who resigns from their position must fulfill certain formalities. They must submit their resignation in writing to the Board of Directors of the company and intimate the Registrar of Companies (RoC) about the same within 30 days of their resignation. Additionally, they are required to attach the relevant documents along with the resignation letter to complete the necessary filings. These documents include proof of dispatch of the letter, and if any acknowledgment is received from the company, it is mandatory to attach that as well.

After the resignation is received, the Board of Directors is required to pass a resolution accepting the resignation and keeping a record of the same in their minutes of the meeting. The company must also update their website and mention the resignation in their annual report. It is crucial for the resigning director to receive an acknowledgment of their resignation and a copy of the e-form DIR-12 filed with the Registrar of Companies for their reference and record.

As stated in the Companies Act, a Director who resigns from their position shall be held liable only for the acts done during their tenure in the company. They will be absolved of any future liability relating to the company after their resignation. By fulfilling their obligations, the resigning director can ensure that their resignation is processed smoothly and without any legal issues. 

III. Companies Act 2013

Section 168 and the provision for resignation of directors

Section 168 of the Companies Act 2013 provides a clear view of the resignation of directors, which was absent in the earlier Act 1956. A director may resign from his office by giving a notice in writing to the company, and the Board shall take note of the same and intimate the Registrar. The resignation of a director shall take effect from the date on which the notice is received by the company or the date as specified by the director in the notice. However, the director who has resigned shall be liable even after his resignation for the offenses which occurred during his tenure. In Nirav Modi’s case, Independent Directors on the board were high profile executives, most of whom opted for resignation post-fraud. The Personal assets of these directors are frozen, although an independent director is seldom held liable as they are not involved in the day-to-day business. However, the MCA is in the process of making them held liable presuming that they know the affairs of the company. The resignation of Independent Directors can be a ringing bell for the shareholder as some mismanagement or unscrupulous activities. This can affect the investment of the company, including Foreign Direct Investment. The resigning director shall be held liable even after his resignation for the offenses which occurred during his tenure. In such cases, the director is only liable when he is responsible for the operations of the company and for the acts done with his consent and connivance. On proving the same, directors can be free from personal liability. 

Liability of directors despite resignation

When a director resigns from a company, it is important to understand their obligations and potential liabilities. According to the Delhi High Court, a former director cannot be made personally liable for the company’s dues, unless there is a specific provision stating otherwise. In the case of Sanjiv Kumar Mittal v. Deputy Commissioner (TRC), a former director had their personal bank account attached by the Service Tax Authorities to recover dues from the company. However, the Court held that this attachment was beyond the purview of the Finance Act and that there was no provision making a director personally liable for tax liabilities of a company.

Despite this, directors can still be held liable for tax evasion for the period when they were in office. They may also be liable for misfeasance or breach of trust in relation to the company, especially if they knowingly make false statements or share false information with stakeholders. Directors are the trustees for the money and property of the company and hold an office of trust. If they misuse their powers, they may be required to indemnify the losses incurred by the company.

It is important to note that, as per law, all directors are liable for any debt of the company if the debt was due at the time of their resignation. However, tax liability falls under the burden of the company and is not charged to individual directors. If a director has resigned and a demand letter for payment or liability is received after their resignation, they are not personally liable for such dues or payments. 

IV. Impact on Shareholders and Investors

Importance of directors to investors and shareholders

Directors hold a position of great importance in the corporate world, especially when it comes to investors and shareholders. As per the Ministry of Corporate Affairs, the Board of Directors has significant responsibilities, which include exercising strategic oversight over business operations, ensuring compliance with legal frameworks, and providing credibility through timely disclosures. The directors are expected to make informed and deliberative decisions, monitor management, and perform their duties towards the company and shareholders with due diligence and business judgment.

Investors usually view the board as a representation of the company’s management, and they rely on the board to make significant business decisions concerning the company. Shareholders expect the directors to align their interests with the company’s interests and protect their investments. Moreover, good directors foster corporate governance, promote transparency and accountability, and ensure the company’s long-term success.

In the words of Bob Diamond, former CEO of Barclays Bank, “A strong board and strong governance are fundamental to our business,”

Therefore, the resignation of a director can have significant implications for investors and shareholders. It can impact the company’s management, decision-making, and corporate governance. The departure of key directors can affect investor confidence, and in some cases, prompt a decline in share prices. Hence, it is essential for companies to ensure proper disclosure and filings after a director’s resignation. By maintaining a strong board and governance, companies can safeguard the interests of investors and shareholders and secure long-term success. 

Effects of resignation on investment and Foreign Direct Investment

The resignation of a director from a company can have significant effects on investors and even foreign direct investment (FDI). Investors often consider the board of directors when deciding to invest in a company, and the departure of a director may signal mismanagement or unscrupulous activities. This can lead to a decrease in investor confidence, which in turn can negatively affect a company’s stock price and overall financial performance.

Moreover, FDI can be impacted by the resignation of a director as well. Foreign investors may view the departure of a director as a lack of stability within the company, making them hesitant to invest or do business with the company. This can harm a company’s ability to attract foreign investment and could result in lost opportunities for growth and expansion in the international market.

It is therefore crucial for a company to properly disclose the resignation of a director and the reasons behind it. As per the Companies Act 2013, a company must submit disclosures of detailed reasons for the resignation of an independent director, and confirm that there are no other material reasons for the departure. The company must also make necessary entries in the register of directors and key managerial personnel, as well as on its website and in its board report.

In conclusion, the resignation of a director from a company in India can have significant effects on investors and foreign direct investment. Proper disclosure and timely communication of the reasons for the resignation can help mitigate any negative impacts and maintain investor and market confidence. As a director, it is crucial to fulfill all obligations and follow the necessary procedures outlined in the Companies Act 2013 to ensure a smooth and transparent resignation process. 

V. Disclosures and Filing Requirements

Disclosures and filings required by the company after resignation of a Director

After a director resigns from a company in India, there are several disclosures and filings that the company must fulfill to ensure compliance with regulations and legal requirements. The board of the company shall take note of the resignation letter and authorize the CS, CFO or any other director of the company to file the requisite forms with the Registrar of Companies (ROC). Within 24 hours from the conclusion of the board meeting, the company must submit disclosures of such resignation to the stock exchange where the company shares are listed and update the same on the company’s website within two working days.

In case of the resignation of an independent director of a listed company, the company must provide detailed reasons for the resignation and obtain confirmation from the independent director that there are no other material reasons than those provided. This information must be submitted to the stock exchange within seven working days from the resignation.

The company must file an intimation with the ROC within 30 days from the receipt of the notice of resignation, along with the requisite documents, evidence of cessation and a copy of the board resolution. Additionally, it is mandatory to make necessary entries in the register of directors and key managerial personnel, disclosing the details of the directors who have resigned. These details must be included on the company’s website and in the board’s report, as per Section 134(3)(q) of the Companies Act 2013.

As stated by Sapna, an Advocate and Associate at Redlaw, it is essential to comply with these procedures to ensure that the company meets its legal obligations and avoids any legal implications that may arise from non-compliance. Hence, it is crucial to consult with a legal expert in case of any confusion or complexity to avoid any legal issues after resignation of directors from companies in India. 

Timeframes for fulfilling the disclosure and filing requirements

One of the important aspects of resignation of a director in India is the necessary disclosures and filings required by the company after their resignation. The timeframe for fulfilling these requirements is crucial for the company’s compliance. As per the Companies Act 2013, the company must hold a meeting of the board or pass board resolution by circulation upon receipt of the director’s resignation letter. The board should take note of the resignation letter given by the director of the company. The board shall also intimate the Registrar of Companies (ROC) about the resignation, and further authorize the Chief Financial Officer (CFO) or Company Secretary (CS) to file the requisite form with ROC.

One of the key documents required to be filed with the ROC is Form DIR-12. This must be filed within 30 days from the receipt of notice of resignation from a director, along with requisite documents and fees. If the director forwards a copy of their resignation to the ROC, they must do so within 30 days of resignation, along with detailed reasons for resignation and fees.

If the company is listed on the stock exchange, the company must submit disclosures of such resignation to the stock exchange within 24 hours of the conclusion of the board meeting. The same must also be updated on the company website within 2 working days, in compliance with Regulation 30 and 46(3) of the Listing Obligations and Disclosure Requirements Regulations.

Overall, it is important for companies to adhere to these timeframes and fulfill the necessary disclosures and filings with the ROC and stock exchange, to maintain their compliance and transparency. As Sapna, an Advocate and Associate at Redlaw, recommends, “It is pertinent to make necessary entries in the register of directors and Key Managerial Personnel regarding the date of cessation of office and reasons thereof.” 

VI. Conclusion

Summary of the main points on resignation of directors in India

In summary, the resignation of a director from a company in India requires a proper process to be followed. The notice of resignation must be given in writing to the company and filed with the Registrar of Companies within 30 days, along with the reasons for resignation. The effective date of resignation is either the date on which the notice is received by the company or the date specified by the director, whichever is later. Directors who resign can still be held liable for offenses that occurred during their tenure, but only if they were responsible for the operations of the company and for acts done with their consent and connivance. Resignations of Independent Directors can be a signal to shareholders of mismanagement or unscrupulous activities and can affect the investment of the company, including Foreign Direct Investment. Disclosure and filing requirements must be fulfilled by the company within specific timeframes after the resignation, including submission to the stock exchange and the posting of the resignation on the company website. The Board of Directors should mention the resignation in the Director’s report of the Annual General Meeting, and the company is required to make necessary entries in the register of directors and key managerial personnel. In conclusion, the resignation of directors must be conducted according to the laws and regulations set in place to ensure the smooth transition of business operations within the company.