An important change occurred effective 18 February 2021 with regard to Australian directorships. From this date, new rules exist regarding the “effective date” of resignations that are not notified to ASIC on time.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (Phoenixing Act) was passed by Parliament in February 2020. The Phoenixing Act is aimed at assisting regulators, liquidators and other interested parties to combat illegal “phoenixing activities”. Phoenixing in this context is when a company liquidates, winds up or is otherwise abandoned in order to avoid paying their debts.
The Phoenixing Act introduces amendments to the Corporations Act 2001 (Cth). While the amendments are aimed at combating phoenixing activities, they apply to all director resignations including administrative oversights and inadvertent delays by companies lodging director resignation forms with ASIC.
Changes to the “effective date” of a director’s resignation
If a director’s resignation is notified to ASIC more than 28 days after the resignation date, the resignation date will be taken to be the date that the notice is lodged with ASIC. The director or the company may apply to ASIC or the Court (provided such application is made within 56 days of the person ceasing to be a director), to determine a different resignation date, however, these applications will be subject to increased scrutiny and directors cannot expect automatic relief.
As a practical example of the implications of the new Phoenixing Act, if a director resigns on 1 July but does not notify ASIC until 1 August (i.e. more than 28 days after the resignation occurred), the “effective date” of the resignation will be deemed to be 1 August.
This new rule has important practical consequences, as a 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.
Directors and companies must ensure that notice is given to ASIC of a director’s resignation within 28 days of the relevant person ceasing to be a director of the company. Accordingly, if you resign your position as a director you should:
- ensure the company notifies ASIC within the 28 day period and ask for proof of lodgement; or
- rather than relying on the company, you could elect to notify ASIC of your resignation yourself.
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Published: 3 March 2021