Resigning as a director from a limited company in the UK is a simple matter of filing paperwork. Still, there are several financial and legal considerations you should be aware of before making the move.

Whether you're stepping back from the business entirely or simply removing yourself from the day-to-day running of the company, it’s essential to make sure you protect your interests and leave things in good order.

How to Resign as a Director

The resignation process itself is relatively straightforward:

1.  Submit a Resignation Letter
Write to the company’s board or the other directors confirming your decision to resign and the effective date. It’s good practice to keep a written record.

2.  Companies House Notification
The company must file a TM01 form with Companies House to remove you as a director from the official record. Another director or company secretary typically does this, but it’s wise to check that it’s been completed.

3.  Check Internal Agreements
Review the company’s articles of association and any shareholders’ agreement, as there may be additional steps or notice periods required.

Financial & Legal Considerations Before You Step Down

While the process is simple, the risks can be anything but. Before resigning, make sure you’ve considered the following:

1. Personal Guarantees
Have you signed any personal guarantees for loans, leases, or supplier credit? If so, resigning as a director does not release you from these obligations. You may remain personally liable, even if you're no longer involved in the business.
Tip: It’s worth checking with lenders or suppliers to understand your position.

2. Directors' Loan Account (DLA)
Make sure your Director’s Loan Account is up to date and reconciled. If you owe money to the company, this could become taxable or even lead to legal disputes down the line. For example, if you have an overdrawn DLA that isn’t repaid within 9 months of the year-end, you could face a corporation tax charge under s.455 rules.

3. Outstanding Liabilities
You generally aren’t personally liable for company debts such as PAYE, VAT, or corporation tax…unless:
 - You acted fraudulently or wrongfully, e.g. incurring debts you knew couldn’t be repaid.
 - You allowed the company to trade while insolvent, which can trigger director liability under insolvency law.
If the company is struggling financially, it’s best to seek advice before stepping down.

4. Fiduciary Duties
Until your resignation is official, you remain legally responsible for acting in the best interests of the company and, if the company is facing financial distress, in the best interests of its creditors.
Resigning won’t erase past actions either. If legal claims arise later, you could still be investigated for decisions made during your time as a director.

Don’t Forget…

Still a Shareholder?
Resigning as a director doesn’t affect your shareholding. You’ll still retain ownership (and possibly voting rights) unless you sell or transfer your shares.

Back Up Important Information
Once you resign, you may lose access to company systems and data. Make sure you have copies of any personal records or anything needed to finalise your exit.

Insurance Cover
Check whether the company has Directors & Officers (D&O) insurance that continues after resignation (“run-off cover”). This can protect you against future claims.

Before You Resign - Our Advice

Resigning is more than just a formality - it’s a legal and financial step that should be handled with care.

Before stepping down, we recommend reviewing:

• Any personal guarantees in place
• The current position of your Director’s Loan Account
• The financial health of the business (especially if there are tax or creditor concerns)

We're happy to support you with a full review of your position and help ensure everything is properly wrapped up - so you can move on with confidence.
Need help reviewing your financial risks before resigning? Get in touch and speak to one of our experienced advisors - we’re here to help.