Director Shares: Stick or Twist? Now!

If you’re planning on resigning as a director of your company, you must evaluate whether or not you want to maintain your ownership stake in the business. This article deals with company director shares and director share dealings.

The Articles of Association or Shareholders’ Agreement usually outlines what steps to take when resigning as a director, including the resignation process and requirements for disposing of your shares.

If you sell your shares, the first step is coming to an agreement with the company on how they should be valued.

Table of Contents

Checking the Articles of Association or Shareholders’ Agreement

The Articles of Association provide a guide for how the company should be run, including what to do in specific situations such as when a director wants to resign. A Shareholders’ Agreement may also establish procedures and steps to take.

A director’s resignation or removal from office might be covered by a clause in the Articles or Agreement, including what you must do with your shares.

If you sell the shares to other shareholders, you may be able to retain them for later sale if no instructions are provided or no shareholders want to buy them.

Is it better to keep your company director shares or sell them?

Depending on various money-related factors, it might be more advantageous for you to sell your shares. These include:

The company’s performance

Is the company doing well? Do you think it has reached its full potential or could it still grow? If there is more potential and you can wait, it may be better to sell your shares when the stock price goes up.

Is the company likely to be sold at some point?

If you think the company will be sold in the future, as a shareholder you could receive some of the funds. In this case, it would be best to keep your shares if possible.

Your right to receive dividends on your company director shares

You are also entitled to receive dividends from the company, which could provide extra income for you. However, there is no guarantee that future directors would be willing or able to declare dividends on a regular basis.

Do you hold any voting powers?

Shares might enable you to voting privileges on company decisions in the future, such as operational procedures and resolving a conflict. If your vote holds importance to you, or could sway a situation that you want to be part of, it’s justification enough for hanging onto your shares.

What are your plans for the future?

Are you plan to establish a company that could be seen as competing with your current employer, you must first check for any restrictions, like a non-compete clause.

If you resign and sell your company director shares?

If you want to sell your shares, it can be tricky to find a price that everyone agrees on. But if there’s a shareholders’ agreement in place with specific share valuation instructions, then the process might be simpler.

If you disagree with the other directors on price, reach out to a professional – preferably someone who is financially independent of the company. This way, they can help end the stalemate surrounding share prices so that you can move forward with your resignation.