David Scott has resigned of his own accord amid reports that he received money from an anonymous benefactor in exchange for his departure. He was already under suspension while police investigated pupil claims of abuse.
The school, which has about 60 pupils aged three to 17, has not yet achieved the registration needed because it has care of disabled children. Technically it remains in breach of the Act but has done enough to ward off the threat of closure made by social work officials at a meeting with governors.
The board accuses Mr Scott of slackness in ignoring registration procedures. He also allowed staff to work at the school without contracts and in the opinion of one observer was "incompetent at running the school though a charismatic personality".
Donaldson's, it is said, took seriously criticisms by the Inspectorate of its education provision but paid less heed to ensuring that its care regime met the requirements for registration.
It was during an HMI inquiry in the spring that accusations by pupils of abuse led to the suspension of three staff, including the principal. A report is being considered by the procurator-fiscal after Mr Scott and one other teacher were charged with offences involving physical assault.
The Rev John Chalmers, vice-chairman of the board, told The TES Scotland:
"We have a major task ahead to rebuild the reputation of the school and to ensure that all regulations are fulfilled and that the school is registered. Many of the issues have already been addressed." A board meeting next month is expected to set about finding a new principal.