What Is The Effective Date Of A Director’s Resignation?

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What is the effective date of a director’s resignation? This issue was discussed in the case of Tan Kei Vin & Ors v Feed Me Love Sdn Bhd & Ors1. We will briefly look at it below.

Brief Fact of the Case

Kei Vin and another person were appointed as directors of Feed Me Love in 2018. There was already a director sitting in the company prior to their appointment (the Third Director), who owns 99% of the shares in Feed Me Love.

In 2019, Kei Vin resigned and the other person resigned. They tendered in their resignation as directors with immediate effect via their respective written notices dated 15.03.2019 to the board of directors of Feed Me Love. The notices were delivered to the secretary of Feed Me Love at its registered address.

However, at this juncture (two days from the date of their resignation), a form that is required to be lodged by the company secretary when a director resigned (Return Giving Particulars In Register of Directors, Managers & Secretaries And Changes Of Particulars) could not be lodged. This was due to the fact that there was no director’s resolution to reflect the above due to the fact that the Third Director also resigned on 18.03.2019- there was no director left in Feed Me Love to facilitate the lodging of the return to reflect their resignation (at the date of the proceedings in court, they were still the directors of Feed Me Love).

The Parties’ Contention

Aggrieved by the stunt that Third Director pulled, Kei Vin and the other person instituted court proceedings against Feed Me Love and the Third Director in Court. They noted that since they have effectively ceased to be directors for Feed Me Love on 15.03.2019, the Third Director as a sole director of Feed Me Love cannot resign yet and must facilitate the lodging of the return to reflect their resignation.

The Third Director contended otherwise, nothing that (amongst others):

  1. There is no acknowledgment of receipt of the resignation letters or written notices;
  2. He did not receive the written notices of their resignations and was not informed verbally of the said resignations.

As a result, the Third Director contends that Kei Vin and the other person’s resignations were improper and therefore invalid. She further contends that since her resignation was proper and valid, it is not her but the Kei Vin and the other person who are the remaining directors of the Feed Me Love.

To cut the long story short, was the resignation tendered on 15.03.2019 valid?

The Court’s Decision and Rationale

The court says yes.

First thing first, the court had a brief look at the law in regards to this issue:

  1. Section 201 (1)(a)2 of the Companies Act clearly stipulates that a director can resign (subject to Section 196(3) and Section 209) by giving written notice to the company at its registered office. The notice is considered effective when it is delivered to the registered office (even if the date is a later date from when the notice is given to the company).
  2. However, a director cannot resign if the number falls below the minimum number of directors required in a company unless another person is appointed in his/ her place3 (in this case, the minimum number is 1).
  3. In the event, a director resigned, the remaining director must lodge the return within 14 days of such a change of number of directors in a company and also notify the register of companies of the director’s resignation. Failure to do so is an offense under the law6.

So why did the court say yes? Simply put (and based on the above):

  1. It is clear that the resignation of a director must be by way of a written notice and takes effect on the date stated in such notice upon the notice being delivered to the company’s registered office;
  2. There is no requirement of acknowledgment of receipt of such written notice. There is also no requirement that the notice of resignation must be served on the remaining directors or that the resignation of a director is subject to such resignation being accepted by the board of directors; and
  3. Since the notices were delivered to Feed Me Love’s registered office and received by the company secretary, the resignation tendered is valid and effective on 15.03.2019.

And there you have it- as long as the notices are tendered according to the laws mentioned above, the effective date of a director’s resignation is the date that is written in the resignation letter.

Need a lawyer to advise about your legal dispute:

1. [2019] MLJU 1024.

2. 2016.

3. Section 196 (3), Companies Act 2016.

4. Section 57 (4), Ibid.

5. Section 58, Ibid.

6. Section 57 (6), Ibid.

Other related articles:

  1. Introduction to Type of Director in Malaysia
  2. Removal of a Company Director in Malaysia
  3. The Do’s and Don’ts of a Company Director