late-at-night-in-the-corporate-office-meeting-room-at-conference 1600 x 400

New rules for resigning directors come into force

Rohan Harris, Andrew Parlour, Rory Maguire, Solomon Miller and Jonathan Teh

Significant changes have been introduced for company directors when resigning their position. From 18 February 2021, new rules exist regarding the ‘effective date’ of resignations that are not notified to ASIC on time, and the resignations of last remaining directors. These changes are part of ASIC’s continued push to eliminate illegal phoenixing activities.

The Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020 (Cth) has introduced new regulations regarding the process and timing of director resignations and the resignation of last remaining directors, as well as granting additional powers to ASIC and liquidators. The provisions are part of the aim to prevent companies from liquidating, winding up or being abandoned in order to avoid paying their debts and directors must consider these new laws when planning to resign their position.

Changes to the ‘effective date’ of a director’s resignation if notified late

If a director’s resignation is notified to ASIC more than 28 days after the resignation date, ASIC will now impose an ‘effective date’ of resignation as the date ASIC receives the notice. For example, if a director resigns on 1 March but does not notify ASIC until 1 June (i.e. more than 28 days after the resignation occurred), the ‘effective date’ of the resignation will be deemed to be 1 June. Late lodgment fees would also still apply.

This new rule has significant practical ramifications, as the director:

• will still be responsible for their duties as a company director until the later ‘effective date’; and
• may remain liable for conduct that occurs after the date they thought they had resigned.

Previously, ASIC would allow resignations of company directors to be ‘backdated’, but this is no longer the case.

Resignation of last remaining directors

Under the new rules, any notices to ASIC that resign the last appointed director without replacing that appointment will be rejected. This is to ensure that:

• companies are not left without any directors; and
• directors cannot seek to avoid responsibilities to creditors and other interested parties.

Similarly, a director may not be removed by a member’s resolution if doing so would leave the company without a director – such a resolution is void.

Limited exceptions to this rule exist, including if the last director is deceased, the company is being wound up and if the director never consented to their appointment.


Recommendations

These changes are significant and, in addition to stopping director resignations in the context of phoenixing activities, will also apply to administrative oversights and inadvertent mistakes by companies.

Accordingly, if you are a director and you resign your position, we recommend that:

• you ensure that the company notifies ASIC (via an ASIC Form 484) within the 28 day period, and request evidence of this; or

• alternatively, you can choose to notify ASIC of the resignation or removal from the company yourself (via an ASIC Form 370).

How we can help

Please contact Rohan Harris, Andrew Parlour, Rory Maguire, Solomon Miller or Jonathan Teh from our Corporate and Commercial team should you require further advice in relation to corporate advisory or governance matters. 

If you would like to stay up to date with Alerts, news and Insights from our team, you can subscribe to our mailing list here.

View related insights

business-seminar-picture 360 x 240

Treasury opens consultations on the corporations director identification number regime

17 Mar 2021

Treasury is consulting on the new data standard, disclosure framework and draft legislative instruments which will support the commencement of the director identification number (Director ID) regime.

View
Australian Consumer Law 360x240

The $100,000 Question: Are you a “consumer” for the purpose of the Australian Consumer Law?

27 Jan 2021

The definition of “consumer” under the Australian Consumer Law is changing and it could well impact you.

View
Data-base-computer-360-x-240

The ACCC’s clear warning – the time is now to perfect privacy policies and procedures

17 Nov 2020

In the 12 months since the Australian Competition and Consumer Commission (ACCC) released its final report on its Digital Platforms Inquiry (DPI), the ACCC has filed two law suits against Google with ...

View