November 10, 2018

Q&A – What to do if a director wants to leave the business?

Written by Peter Lynn

Q: “I run a business with two other directors and we each own 33% of the shares of the company.

Although business is good, I have a feeling one of the directors wants to leave. What do I need to consider?”

A: Firstly tackle the issue face to face and ask the question “Are they thinking of leaving”?

If they are, check to see if you have an effective shareholder agreement and effective directors service contracts in place to cover the situation.

If they are well drafted there will be little to fear on exit, and the process will be transparent and relatively
straightforward. Sadly, however, most companies are not fully prepared.

In a large number of small businesses, a director has three roles; director, employee and owner (as a shareholder) and leaving as a director does not always mean the individual is leaving as an employee or as a shareholder.

Clarification is crucial and if your shareholder agreement or director service contract does not cover this eventuality, seek expert advice to manage the exit and limit the damage where possible.

Don’t let a potentially small change in your company result in a long drawn out battle.

Get advice early by contacting the Commercial Team at Peter Lynn and Partners on 01792 450010 or email [email protected]


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