Resigning correctly as a director from a company

BOARDROOM

What you need to know:

  • If you resign as a director from a company do it correctly or you could face unexpected unwanted attention from the law.
  • Being charged for an alleged crime you had nothing to do with is a traumatic experience for a law-abiding citizen.
  • Navigating the criminal justice system to clear your name is costly and you may never be able to clear the online articles written in which you are wrongly accused.

If you resign as a director from a company do it correctly or you could face unexpected unwanted attention from the law.

Being charged for an alleged crime you had nothing to do with is a traumatic experience for a law-abiding citizen. Navigating the criminal justice system to clear your name is costly and you may never be able to clear the online articles written in which you are wrongly accused.

I learnt these lessons in 2019 after being falsely accused of tax evasion and being in possession of unaccustomed goods alongside other individuals. The prosecution lumped me into a wide sweeping net as I was a non-executive director of a company, Wow Beverages Ltd (WBL), which had links with Africa Spirits Limited (ASL) — the company that was the centre of the investigation.

That I had never been a director or officer of the company didn’t shelter me from legal exposure. The fact I wasn’t receiving any remuneration from ASL in any form was not taken into account either. The only thread between me and ASL was my involvement with WBL, which I had exited several years earlier or so I thought.

My mistake — when I left WBL I never followed up on removing my name from the company registrar’s list of directors for the company to ensure that even on paper I had severed ties.

So, in one sense, the Director of Publication Prosecutions (DPP) was within their right in associating me with WBL for the purposes of the suit, although closer scrutiny into the evidence presented before the court would have cleared my name earlier on before being charged.

I was fortunate enough that the DPP did re-examine the evidence and withdrew the charges against me a year into the case. Learn from my experience and avoid endless hours in court, having your name tarnished and spending money to clear your name by following some simple procedures.

To start the resignation process, a director(s) or shareholder(s) must first communicate to fellow colleagues in the board. This can be done through a written notice addressed to the company’s board with details on the intention to resign and the date it is to be effective from. This should be sent to the company’s registered office and a copy can be kept by the individual for future reference.

In particular, according to the Kenya’s Companies’ Act 2015, to resign as a director(s), an individual should sign an affidavit highlighting the resignation details and transferring their interest to another director(s) (if applicable).

You should also submit your resignation letter together with an Affidavit to the company secretary and file for CR9 (Notice of cessation of office of directors) and Interim Annual Return. Further, the outgoing director and incoming/ remaining director(s) should also sign a transfer deed (Form of transfer) to be assessed by the company secretary and registered at the Registrar of Companies. This is applicable if the director is also a shareholder in the company.

Upon the transfer confirmation, the company secretary should apply for a CR 12 that reflects the new list of director(s) and their shareholding. With the new online era, all such resignations and transfer of shares are now being carried out online on e-citizen, and a notification will be sent to the outgoing director or shareholder to confirm that they approve the resignation before the Registry processes the changes.

Section 93A stipulates that every company is now required to keep an updated list of its current members, which shall include information relating to beneficial owners and their share capital as prescribed in the regulations.

The firm is then required to notify the registrar within 30 days after completing its preparation. Failure to comply, the company, and each officer of the company who is in default, commit an offence and on conviction are each liable to a fine not exceeding Sh500,000.

To conclude if you are opting out of a company board or trying to sell your shares in a company you no longer wish to be part of make sure the paperwork is up-to date and formalised . Failure to do this could end in turmoil and God forbid if the company gets caught up in legal issues. At the end of the day, the justice system throws a wide net where human considerations appear irrelevant. It’s not worth the stress and its easily avoidable.

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