Every company registered in England and Wales must have at least one director — but what happens when that one person wants to resign?
The issue of a sole director stepping down raises important questions about legal duties, company governance, and the potential consequences for the business.
Under the Companies Act 2006, every company must have at least one director. While a company’s articles of association may set a maximum number of directors, they rarely prevent a sole director from resigning.
As a director, you owe fiduciary duties to act in the best interests of the company. At first glance, resigning and leaving the business without management might appear to breach those duties — but in practice, that’s not always the case.
A person cannot be compelled to remain a director against their will. Unless the company’s articles specifically require a new director to be appointed before resignation (an uncommon clause), a sole director can legally resign, even if that leaves the company without leadership.
If a sole director resigns and no replacement is appointed, the company immediately breaches sections 154 and 155 of the Companies Act 2006, which require all companies to have at least one director.
In this situation:
The Secretary of State (via Companies House) can direct the company to appoint a director under section 156.
The shareholders are responsible for rectifying the issue by appointing a new director according to the company’s articles.
If no action is taken, the company and its officers (excluding the resigned director) commit an offence under company law.
Failure to appoint a director can lead to the company being struck off the Companies House register, with its assets transferred to the Crown — a situation that can be costly and complex to reverse.
While some may argue that a director has an ethical duty to avoid abandoning the business, the law recognises the practical limits of that obligation. A director cannot be forced to continue if they are unwilling, even if it leaves the company temporarily “without a parent.”
To continue the metaphor — a director “holding the baby” isn’t legally obliged to take care of it, though doing so may be in the company’s best interest.
If you are a director or shareholder facing governance issues, disputes, or concerns about compliance, our Corporate and Dispute Resolution Teams can help.
Please fill out the contact form on this page, email info@ansons.law or call 01543 431197, and one of our team members will be in touch.
Disclaimer: The contents of this article are for general information only and do not constitute legal advice. The law and HMRC guidance may have changed since publication. Always seek professional advice before taking action.