A resignation or not?

Any ‘legal eagle’ help on this one would be much appreciated. This really happened just recently and I pose the question out of interest more than anything else.

I recently attended the AGM of a UK-based Ltd Company The company’s Articles of Association state that resignations from the directors should be in writing.

The AGM ends and with some 100 or so people still in the room, when the Chief Executive throws his dummy out of the pram and declares that he resigns… very loudly… much to the amusement of the 100 folk still gathered there. (This followed a short, private conversation between him and some of the other board members).

Resignee re-thinks his decsion later (after the meeting closes and everyone goes home) and decides he didn’t mean to resign at all and so turns up at next Board meeting stating:

  1. He never put it in writing
  2. He is not willing to explain matters in writing or otherwise, to the 100 or so individuals who reasonably believe that he is no longer in post

The Board sit back and accept this without question.

Any thoughts (legal opinions preferred to personal opinions… but both welcome)

Walor

IANAL, but I think a key part of the answer comes from this:

If they are responsible for interpreting whether the resignation counts, then it sounds like they’ve rendered a decision. IMHO.

I don’t know what it might take to stir up a stockholders’ revolt to force the opposite decision.

He did what with his what?

IANAL, and IDNLIGBaNI but it seems pretty clear to me that the Board had little choice but to 'sit back and accept his interpretation

Since the company wrote the Articles of Association, He would be presumptively favored in the interpretation of any ambiguity in interpreting it. Even if he had helped write the articles, he would’ve done so as an agent of the company, but in resigning -had he resigned- he would been acting as a private individual.

He didn’t make the declaration in an official setting. The AGM was over. It was poor judgement to do this in the presence of others, but it wouldn’t have the same weight as if it’d been said in a Board meeting. If he’d yelled that in a crowded disco, and members of the board were present -even if he knew or suspected they might be present- would you call that official notification? I wouldn’t. The Board might have cause of action for recompense for damages, if they had relied on his statement and hired an outside recruiting firm, but he would still have his job (unless they decided to fire him).

Essentially, they were overhearing a private conversation. Loud or not, amusing or not, it was not a remark addressed to them. I can see why they might assume that it meant there would be a change in the top management, but they would be very unwise indeed to rely on this incident to, say, guide their future stock transactions, without verifying the resignation.

In the US, they might be guilty of insider trading, if they believed they were acting ion the basis of an official but not publicly announced company action in their capacity as shareholders - but whether they acted on the information as “official” or merely overheard an ‘off the record’ remark, a US court would be unlikely to give the incident any weight in compensating them.

They observed a verbal temper tantrum. A US court would treat it as such. Tantrums are neither illegal acts nor are they legally binding when a written document is required but not proffered. As a practical matter, most people know that the history of business is dotted with moguls and con-men who have used such off-the-record tantrums to manipulate customers or others.

They might “reasonably assume” that the CEO would be stepping down, but frankly, I’d question even that. We all know about tantrums. It would only be prudent to confirm the official status of his resignation before acting on it. Not only might he fail to complete the resignation, but the Board might be intimidated into yielding some concession he was seeking in the private conversation.

It sounds like you want this CEO out, but I really don’t see any reasonable basis by which you can hold him to a verbal utterance made to another.

I think that he threw the proverbial baby out of the proverbial carriage. The redneck in me might have mentioned that the CEO soiled the bed when describing a similar circumstance.

A “dummy” is UK-speak for what I think is called in the US a baby’s pacifier. “He threw the dummy out of the pram” is a common idiom describing somebody who, in a fit of temper, acts irrationally and contrary to his own interests, usually in order to draw attention to himself. It implies immaturity.

Thanks for the explanations. It took me a while to realize it was a metaphor for throwing a hissy fit. I thought it was slang for some kind of executive action.

I think KP got it right. In addition, I’d note that it is the responsibility of the Board to hire, supervise, and replace officers and to set company policy. The stockholders control the company only through the Board. Therefore, if the Board chooses not to accept this as a resignation (even were they empowered to), then that’s final. If this really incenses the stockholders, they could replace the Board members with others who would be willing to sack the CEO, or they could pass an amendment to the bylaws disqualifying him, or they could (depending on the company articles, bylaws, and local law) exercise one of a few other measures of control, but only as a whole; that is, by majority vote (or in some cases, by supermajority).

–Cliffy

It’s up to the shareholders - who own the company - to organise an Extraordinary General Meeting - and fire the guy.

This guy has lost control and has is not a man of his word. He’s therefore not a fit Chief Executive.

P.S. “He threw the dummy out of the pram” – that’s a brilliant idiom. I’m going to start using it, no matter how many funny looks I get.

Presuming a bit there?

Presuming a bit there, QTS?

Thanks very much for the responses… much appreciated.

I wondered the extent to which this outburst constituted a contract of some sorts. I know that there are circumstances in which verbal contracts are as binding as those in writing. Maybe it doesn’t apply in the case of a public resignation.

IANAL, but a CEO is not a director.

An “outburst” is never a contract. A contract requires formation (offer and acceptance) plus consideration on both sides. In other words, a meeting of the minds.

The guy might have given an effective resignation and the board might have effectively accepted that resignation. But there is nothing to prevent them all from changing their minds five minutes later and saying “let’s forget it happened.”

Written contracts are “verbal.” What you mean is an oral contract. In general (putting aside the statute of frauds), there is no difference between an oral and a written contract. A contract is a contract – they are equally enforcible. The only problem with an oral contract is that often there might be a difficulty in proving that it existed.

The statute of frauds is an exception to this rule which requires certain kinds of contracts to be “memorialised” (written down).

… In other words, nothing in this situation has to be in writing, unless there was an employment-type contract that required resignation to be in writing. The board is free to kick the guy out on his ass if they want to for any reason or no reason, unless, again, there is a contract that specifically prevents them from doing so.