Perspective | Analysis of the director resignation procedure, legal risks, and litigation for removal from the register
Published:
2025-06-30
Director resignation involves numerous legal procedures and risks in corporate governance and operation. Properly handling related matters is of great significance to protecting the legitimate rights and interests of directors, maintaining the normal operation of the company, and ensuring the stability of market order. Based on the current Company Law and the Implementation Measures for Company Registration Management, this article provides a detailed explanation of the procedures for director resignation, legal risks, and issues related to litigation for deregistration.
In the process of corporate governance and operation, the resignation of a director involves numerous legal procedures and risks. Properly handling these matters is crucial for protecting the director's legitimate rights and interests, maintaining the company's normal operation, and ensuring market order stability. This article, based on the current Company Law and the Implementation Measures for Company Registration Management, elaborates on the procedures for director resignation, legal risks, and related issues. The lawsuit for removing a director from the register The following is a detailed explanation of the relevant issues.
I. Effective Procedures for Resigning from the Position of Director
(a) Written Notification to the Company
Article 70 of the Company Law clearly stipulates that a director's resignation should be notified to the company in writing, and the resignation takes effect upon receipt of the notification by the company. This provision aims to ensure that the company is promptly informed of the director's intention to resign and provides a clear timeline for subsequent arrangements. For joint-stock limited companies, Article 120 of the Company Law states that, except as otherwise provided in Article 128 of this Law, the provisions of Articles 67, 68(1), 70, and 71 shall also apply, thereby extending the requirement for written notification of resignation to joint-stock limited companies.
(b) Resolution of the Shareholders' Meeting or Board of Directors
According to Article 59 of the Company Law, the election and replacement of directors and supervisors fall within the purview of the shareholders' meeting. This means that in the context of a director's resignation, the shareholders' meeting needs to pass a resolution to formally confirm the resignation and complete the process of electing or appointing a new director. Article 112(1) of the Company Law further clarifies that the relevant provisions on the powers of the shareholders' meeting of a limited liability company apply to the shareholders' meeting of a joint-stock limited company, ensuring the standardization and consistency of different types of companies in this key governance aspect.
(c) Handling Change Registration
Regarding change registration, Article 9 of the Market Entity Registration Management Regulations clearly stipulates that matters such as company directors, supervisors, and senior management personnel should be filed with the registration authority. Article 29 of the Regulations further requires that market entities, after making a change resolution, decision, or experiencing a statutory change, must file with the registration authority within 30 days to ensure the timely updating and accuracy of registration information. Articles 15 and 23 of the Implementation Measures for Company Registration Management respectively detail the company's obligation to actively handle change registration and the special circumstances of court assistance in executing the removal of relevant registered information, jointly constructing a complete and standardized system for change registration.
II. Legal Risks That May Still Be Incurred After Resignation Without Handling Change Registration
(a) Continued Assumption of Director's Responsibilities
According to Article 188 of the Company Law, if a director violates laws, administrative regulations, or the company's articles of association in the performance of their duties, causing losses to the company, even if they have resigned, they are still liable for compensation if the change registration has not been completed. This is because, before the information is updated by the registration authority, the outside world still regards them as a director of the company, and the relationship between them and the company, as well as the corresponding responsibilities, have not been substantially eliminated.
(b) Facing Legal Liability
1. Compensation Liability During Tenure
(1) Damaging the company's interests by using related relationships. Article 22 of the Company Law stipulates that if a director uses related relationships to damage the company's interests, causing losses to the company, they shall bear the liability for compensation. Before the change registration is completed, such acts that may have occurred during their tenure can still be held accountable.
(2) Failure to promptly urge the payment of capital contributions. According to Article 51 of the Company Law, if a director fails to urge the company to promptly collect capital contributions from shareholders, resulting in losses to the company, they shall bear the corresponding liability for compensation.
(3) Shareholders' withdrawal of capital contributions. According to Article 53 of the Company Law, if a director knows about or fails to perform their verification obligations regarding shareholders' withdrawal of capital contributions, they may bear joint and several liability for compensation.
(4) Liability for illegal decision-making. Article 125 of the Company Law stipulates that for illegal resolutions of the board of directors, directors who vote in favor may face the risk of being held accountable.
(5) Illegal financial assistance. Article 163 of the Company Law stipulates that if illegal financial assistance causes losses to the company, the directors who are responsible shall bear the liability for compensation.
(6) Violation of laws, administrative regulations, or the company's articles of association in the performance of duties. Article 188 of the Company Law reiterates that if the performance of duties violates relevant regulations and causes losses to the company, the director shall bear the liability for compensation.
(7) Causing harm to others in the performance of duties. Article 191 of the Company Law stipulates that if a director, in the performance of their duties, causes harm to others due to intent or gross negligence, they shall bear the liability for compensation.
(8) Illegal distribution of profits to shareholders. According to Article 211 of the Company Law, if the illegal distribution of profits to shareholders causes losses to the company, the relevant responsible parties, including directors, shall bear the liability for compensation.
(9) Illegal capital reduction. Article 226 of the Company Law stipulates that if illegal capital reduction causes losses to the company, the responsible parties, including directors, shall bear the corresponding liability for compensation.
(10) Failure to timely perform liquidation obligations. According to Article 232 of the Company Law, as a company liquidation obligor, if a director fails to timely perform liquidation obligations, causing losses to the company or creditors, they shall bear the liability for compensation.
(11) Neglect of liquidation duties. Article 238 of the Company Law stipulates that if members of the liquidation team neglect their liquidation duties, causing losses to the company or creditors, they shall bear the corresponding liability for compensation.
2. Liability for Failure to Properly Handle Change Registration
If a director fails to promptly notify the company or the registration authority, they may be held nominally liable for subsequent illegal acts of the company (such as illegal operations). At the same time, Article 29 of the Market Entity Registration Management Regulations points out that if a company fails to register changes within 30 days, the registration authority may order corrections, and the company and relevant responsible persons may face corresponding penalties.
(c) Inability to Normally Undertake New Work
According to Article 70 of the Company Law, if the company has not handled the change registration, the director is still legally considered the incumbent director, which may hinder their ability to normally undertake new work, thereby affecting their career development path and personal life plan.
III. Requirements for Filing a Lawsuit to Remove a Director from the Register
(I) Resignation procedures have been followed
Directors must submit their resignation notice to the company in writing in accordance with Article 70 of the Company Law, and ensure that the company has actually received the notice. This is a prerequisite for subsequently filing a lawsuit for deregistration, marking the formal commencement of the resignation procedure within the company.
(II) The company has failed to fulfill its obligation to register changes
If the company, after receiving the director's resignation notice, fails to complete the change registration procedures with the registration authority within the statutory time limit (30 days), it constitutes a violation of the obligation to register changes, providing key factual basis for a lawsuit for deregistration. Article 15 of the "Implementation Measures for Company Registration Management" clearly specifies and details this obligation of the company, providing specific standards for judging whether the company has violated the law.
(III) Exhaustion of internal remedies
This requires that before filing a lawsuit, the director should first try to communicate, negotiate, and resolve the issue of change registration through internal company channels, such as convening a shareholders' meeting or a board of directors meeting. Only when internal channels fail to reach an effective resolution, or the company explicitly refuses to handle the change registration, can it be considered that the requirement of exhausting internal remedies has been met.
For example, in the People's Court's case "Chen Moufei v. Shanghai XX Decoration Co., Ltd. and the third party Zhang Moulin et al. regarding the dispute over changing company registration" (inventory number: 2024-08-2-264-001), the gist of the judgment emphasizes the necessity and urgency of judicial intervention if, after the written resignation notice is effectively delivered to the company, the company does not actively apply for change registration within a reasonable period, and the director has fully exercised internal rights but still cannot resolve the problem.
(IV) Legitimate rights and interests have been infringed
1. The director's legitimate rights and interests are infringed because the company has not handled the change registration, such as being unable to normally carry out new work, facing legal risks, etc.
2. In the case of Lei X and Le X Sports Culture Industry Development (Beijing) Co., Ltd., the court held that Lei X had resigned from the position of director, and Le X Sports Company was slow to elect a new director, resulting in the company's director system becoming a mere formality. Lei X could not remove his director status through internal remedies, objectively increasing Lei X's responsibilities and risks. (See case (2022) Jing 0105 Min Chu 33610).
The director's legitimate rights and interests have been actually infringed because the company has not handled the change registration, such as being unable to normally carry out new work, facing continuously increasing legal risks, etc. This is an important reason and core support for filing a lawsuit for deregistration.
In the case of (2022) Jing 0105 Min Chu 33610, Lei X v. Le X Sports Culture Industry Development (Beijing) Co., Ltd., the court clearly pointed out that after Lei X resigned from the position of director, because the company did not promptly elect a new director, his director status could not be removed through internal remedies, which objectively increased his responsibilities and risks. This situation meets the requirements of infringement of legitimate rights and interests, providing solid factual and legal basis for his lawsuit for deregistration.
Conclusion
In summary, the standardized adherence to the director resignation procedure, a clear understanding of the legal risks of not handling change registration, and an accurate grasp of the elements of a lawsuit for deregistration are irreplaceable in properly resolving legal issues related to director resignation. In practice, directors should resign strictly in accordance with the statutory procedures and closely monitor the progress of change registration; if they encounter obstacles such as non-cooperation from the company, they should promptly collect evidence, actively exhaust internal remedies, and, if necessary, file a lawsuit for deregistration to protect their legitimate rights and interests and avoid unnecessary legal risks and professional troubles. At the same time, companies should also fulfill their relevant obligations in accordance with the law to ensure the standardization of corporate governance and the stability of market transaction security.
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