Ray Kelvin, founder and chief executive of British fashion retailer Ted Baker Plc, resigned on Monday amid misconduct allegations related to his hugging of business colleagues.
Ted Baker in December announced an independent investigation into misconduct claims against Kelvin.
"Mr. Kelvin has denied all allegations of misconduct. He has, however, today agreed to resign with immediate effect from his position as chief executive officer and as a director of Ted Baker Plc," the company said in a statement.
The company said the investigation would continue until the end of the first quarter or early in the second with the focus turning to Ted Baker's policies, procedures and handling of complaints.
"I've decided that the right thing to do is to step away from Ted and allow the business to focus on being the outstanding brand it is so it can face 2019 with fresh energy and renewed spirit," Kelvin said in a statement.
Kelvin, who is top shareholder with a stake of about 35 percent and has been CEO since its launch in 1988, went on a leave of absence a few days after the investigation was launched.
The company said that hugs had become "part of Ted Baker's culture" but were "absolutely not insisted upon."
Acting Chief Executive Officer Lindsay Page has agreed to continue in the role while David Bernstein will act as executive chairman, the company said.
"We are determined to learn lessons from what has happened and from what our employees have told us and to ensure that, while the many positive and unique aspects of Ted's culture are maintained, appropriate changes are made," Executive Chairman David Bernstein said.
Bernstein has indicated he will continue in the position until no later than Nov. 30, 2020, by which time a successor will be appointed, the company said.
Brokerage Liberum, which rates Ted Baker a "buy", said it expects minimal disruption and no changes to the group's long-term prospects.
"The resignation and departure of Ray Kelvin from Ted Baker is unfortunate but understandable," wrote Liberum analysts, adding that Kelvin is leaving the business with a strong team.
Ted Baker has more than 500 stores and concessions globally.