What Happens If I Resign as a Director in NZ?

Question from Allan, What Happens If I Resign as a Director in NZ?

Answer from AI:

Resigning as a director of a company in New Zealand can have several implications, both for you personally and for the business. It’s important to understand the potential consequences before making a decision.

Legal Implications of Resigning as a Director

• Director’s Duties: As a director, you have certain responsibilities under the Companies Act 1993. Resigning as a director would release you from these ongoing duties, but you would remain responsible for any actions taken while you were a director.
• Company Operations: If you resign, the company must still meet the requirement of having at least one director who lives in New Zealand or Australia and is a director of a company in Australia. If your resignation leaves the company without a director meeting this requirement, the company could face legal issues.
• Share Ownership: Resigning as a director does not affect your share ownership. You would still own 49% of the company unless you sell or transfer your shares.
• Decision-Making: If you resign, your influence over the company’s decisions may be reduced, as directors typically make the strategic and operational decisions for the company.

Financial and Business Implications

• Share Value: Your decision to resign could potentially affect the value of your shares, depending on how the market or other shareholders view the change in management.
• Succession Planning: The company will need to consider succession planning to ensure that your duties and responsibilities are adequately covered after your departure.
• Relationship with Remaining Directors: Your resignation could impact your relationship with the remaining directors and shareholders, which might be relevant if you continue to hold shares in the company.

Steps to Consider Before Resigning

1. Review Shareholders’ Agreement: If there is a shareholders’ agreement in place, review it for any clauses that pertain to the resignation of a director and the sale of shares.
2. Seek Legal Advice: It’s advisable to consult with a legal professional to understand the full implications of your resignation and explore other options for resolving the situation with your business partner.
3. Communicate with Stakeholders: Before resigning, consider communicating your intentions to the other shareholders and discuss potential outcomes and plans for the company’s future.
4. Formal Resignation: If you decide to proceed, you must formally resign in accordance with the Companies Act 1993, which includes notifying the Companies Office.

Alternatives to Resignation

• Negotiation: You might try alternative dispute resolution methods to negotiate with your business partner regarding the sale of your shares.
• Buy-Sell Agreement: If there is a buy-sell agreement in place, it may outline the process for selling your shares in situations like this.
• Legal Action: If you believe your rights as a shareholder are being infringed upon, legal action may be an option, but this should be considered carefully and as a last resort.

It’s crucial to seek personalized legal advice to understand the specific implications of resigning as a director in your situation. A legal professional can help you navigate the complexities of company law and provide guidance on the best course of action for your circumstances.