How to resign as a director

It seems that the days of mailing letters are over. But corporate directors beware — resigning from your director’s position by email may not be enough.

Directors of a Corporation can be found personally liable for things like employee wages, environmental damage, and certain unpaid taxes if the corporation does not pay. When corporate affairs begin to go awry, Directors may want to resign their positions to escape or minimize their liability.

If legal proceedings or government collection attempts follow a dispute that affects directors, the focus will often turn to the timing and sufficiency of the Director’s resignation.

The Ontario Business Corporations Act (OBCA) states:

A resignation of a director becomes effective at the time a written resignation is received by the corporation or at the time specified in the resignation, whichever is later.

This means that the resignation must be (1) in writing and (2) delivered to the corporation. While courts have held that resignations by email meet the requirement of a ‘written resignation’, they are often cautious to accept a copy of the sent email as proof that it was delivered to the corporation. They would be even more skeptical about a resignation delivered via social media.

The best practice is:

1. Prepare a written, dated, signed resignation letter that indicates the effective date of your resignation.
2. Deliver the resignation letter by registered mail or courier to the registered corporate address shown in the corporation’s minute book and keep the confirmation of delivery receipt. If you know the official address is out of date, send it to both the official address and one you know is good.
3. Ensure your resignation is diarized in the corporation’s minute book.
4. Instruct the corporation’s solicitor to file a Form 1 (notice of change of director) with the Ministry of Government Services and follow up to ensure it is filed.

Filing Form 1 is important because a third party wanting to take action against a director will search Ministry records for directors and include whoever is listed. Better to not be listed than to try to explain and prove that you had resigned.

While an emailed resignation letter may allow a former director to escape liability, it is open to attack by those who seek to hold that director responsible. This isn’t something you want to give anyone an opportunity to argue is not effective either at all or on the date you need. Given the importance of the resignation letter to a director’s liability, the independent verification of delivery that a courier or registered mail service can provide still reigns supreme.

David Canton is a business lawyer and trademark agent at Harrison Pensa with a practice focusing on technology, privacy law, technology companies and intellectual property. Connect with David on LinkedIn and Twitter.

Note: This post was originally published in September 2020 and has been updated to be more comprehensive.

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