A director may at any time resign his office but if the director has any service contract with the company (such as managing director or a whole-time director), the resignation must be in accordance with the terms and conditions, if any specified in the contract. Section 168 of the Companies Act 2013 contains the provisions pertaining to the resignation of the Director.

Resignation by director shall be in writing: {Section 168 (1)}:

Under this sub-section where a person seeks to resign his position as a director of the company, he should provide to the company a notice in writing. It will not be sufficient if the resignation is verbal. Resignation submitted through an e-mail communication or a faxed communication shall also be construed as written communication and shall therefore be valid. The resignation shall be sent by the director to the registered office of the company addressed to the board preferably and the board shall upon receipt of the same, take note thereof. The Company shall intimate the registrar about the resignation in accordance with rule 15 of the Companies (Appointment and Qualification of the Directors) Rules, 2014. The said rule provides that the Company shall within 30 days from the date of receipt of notice of resignation from the Director intimate the registrar in E-Form DIR-12 and also post the information regarding the resignation on its website if it has one.

Director may forward a copy of his resignation with detailed reasons for the resignation to Registrar-Proviso under Section 168(1):

It may be noted that the above proviso has been partially substituted by the Companies (Amendment) Act with effect from 7 May 2018. The earlier proviso stated that the director shall also forward a copy of his resignation with the detailed reasons to the registrar and this has to be done in the manner laid down in Rule 16 of the Companies (Appointment of Directors and Qualification of Directors) Rules, 2014. This rule has been substituted simultaneously with the above Amendment Act by the substitution of the word “shall” with the word “may”. The rule provides that when the director resigns, he may now within a period of 30 days from the date of resignation forward to the registrar, a copy of his resignation along with the reasons for the same in E- Form DIR-11.

When does Resignation take effect- Section 168(2):

This sub-section provides that the resignation tendered by the director shall take effect from the date on which it has been received by the company or on the date, if any, specified by the director in the notice. The board shall also take the resignation on record upon its receipt.

Liabilities of directors upon resignation:

After the director has intimated to the company his resignation and the intimation has been received, he is absolved from all liabilities arising out of any action taken by the company subsequent to the said date. The resignation is complete where the director is concerned once it is received by the company. He does not have to wait for the company to file E-Form DIR 12 within the prescribed time in the Act to assume that the resignation process is complete. There is also no compulsion that the resigning director shall file E-Form DIR 11 with the registrar to complete the process. The filing of the above return is now discretionary after amendments in the section have been made. However, notwithstanding the resignation, he continues to be liable in respect of acts that have taken place in the company during the tenure of his directorship.

Resignation of all directors from the company (Section 168 (3)

This sub-section considers a scenario in which all the directors of the company have to resign their directorship by virtue of vacation of office by them in the circumstances enshrined under Section 167. In such an unlikely event the Board will be completely dead and the operations of the company may come to a halt. To avoid such a possibility, the sub-section provides that the promoter of the company shall be allowed to appoint the required number of directors until the board can be properly reconstituted. If the promoter does not take the required action, or if the company does not have a promoter, the Central Government shall be empowered to step in and appoint the required directors who shall hold office till the directors are appointed by the company in general meeting so that the company’s operations may not be jeopardized by the absence of a proper board.