Can I resign from my board role mid-term?

Can I resign from my board role mid-term? What happens when you feel you need to consider leaving your board role before your term is up?

The short answer is yes, you can leave a board role mid-term.  However, the real questions lie in the “why” and “how”, as there are multiple things to remember when your time on a board of directors comes up short. 

There’s usually an expected time that you’ll stay on a board, known as a “term.” Terms can vary, but between two and four years is a standard window. 

Every so often, your term may need to come to an abrupt halt for one of multiple reasons. When this happens, early resignation must be executed with the utmost professionalism, legal adherence, and regard for your fiduciary duties and hard-earned reputation.

There are a few reasons for leaving early:

1. Other professional engagements have caused a conflict of interest to arise
2. Personal or health reasons have made it necessary to end your term
3. You have significant, irresolvable concerns about the company’s/board’s performance, transparency, ethical practices or other governance-related issues.

The first thing you need to do when considering resigning is consult the company’s constitution to check if there are any established rules around doing so. Legal advice is essential in this regard, because things can vary across companies, industries and borders. However, there are certain common elements after this step:

• You’ll discuss your impending resignation with the chair. This isn’t compulsory, but it can help make the process smoother. 
• You’ll submit your resignation in writing, on dated correspondence to avoid any ambiguity over when you’ll finish. 
• You’ll include a detailed reasoning for your resignation. 
• You’ll notify any applicable regulatory body. In the UK, for example, this would be Companies House. 
• You’ll take part in all necessary handover formalities, including creating a plan, returning any equipment and confidential documents. 
• You’ll double-check all your legal responsibilities up till the time your resignation takes effect, and follow through on them.

You remain bound by fiduciary duties until your resignation officially takes effect. This means remaining committed to your duty of care (acting with the competence and diligence expected of a director) and the duty of loyalty and good faith (acting in the best interest of the company).

Many directors operate under a service contract, laying out the parameters for expected contributions, remuneration, share options or other benefits. 

Leaving early will be considered a breach of this contract, so it could put all of the above agreements in doubt or cut them short.

The most complicated reason for leaving a board role early is that you have seen governance practices that, despite your best efforts to resolve them, you feel unable to continue because your reputation is at stake.

This is a severe issue. 

Although you’re on your way out, there is an ethical roadmap to follow in these situations, centred on proper and well-timed communication.

For example, you will need to document your concerns on paper and ensure that you have raised them with the Chair and the Board and hope that they are minuted first before potentially making any public claims about them. At the same time, you should realise that once a chair has been made aware of governance failings, non-compliance issues, fraud, etc, they will have their processes to follow, which you need to cooperate with.

Ultimately, regulators will need to know your reasons for resigning, much like your company needs to know. This goes especially for listed companies and regulated bodies, which will be required to disclose the background to your resignation in formal legal filings. 

Also, be aware that if you are resigning because you’ve found governance red flags, the regulators will need to know this too. In these instances, it is critical that you carefully study the language used in all written submissions. You want to be clear on relevant points surrounding the resignation, but not conceal or misrepresent governance issues. Here, your feedback is a crucial window for regulators to do their work correctly.

In a perfect world, you would stay on a board till your term ends. In practice, this isn’t always the case. 

If you have to leave early, ensure that you:

• Seek legal advice for personal and compliance purposes
• Communicate your reasons professionally, in person and in writing to the Chair and the Board
• Cooperate with any procedures once the process has started
• Keep things confidential
• Inform regulators if the situation calls for it