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NEW NOTICE REQUIREMENTS FOR COMPANY DIRECTOR RESIGNATIONS

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By Devin Elliott, Law Graduate

In February 2020, the Australian Parliament enacted the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (‘the Act’). The Act amended the Corporations Act 2001 (Cth), and other related legislation, to combat illegal phoenix activity and improve the accountability of resigning directors.

Illegal phoenix activity is activity whereby new companies are created from the ashes of existing companies which have been intentionally liquidated to avoid paying outstanding debts. The new laws better enable the Australian Securities and Investments Commission (‘ASIC’) to detect, deter and disrupt those who engage in illegal phoenix activity.

As of 18 February 2021, the reforms relating to director resignations have now come into effect. There are two significant changes in particular which directors should be aware of:

  1.  For a director’s resignation to be effective ASIC must receive written notice in the prescribed form within 28 days, otherwise it will only be effective from the date on which written notice is lodged with ASIC.
  1. A director’s resignation will in any event be ineffective if it would leave the company without any directors. A resolution by members of a proprietary company to remove a director will also be void if it results in the company having no directors.

Where a director has resigned and stopped being a director, but only lodges their written notice with ASIC after the 28-day period has expired, they may apply to ASIC or the Court to have the day they stopped being a director fixed as the day of their resignation (instead of the day they lodged the written notice).

Application to ASIC can only be made within 56 days of the day the director stopped being a director of the company and must be lodged in the prescribed form. To fix an earlier date of resignation, ASIC must be satisfied that the director stopped being a director of the company on that day and must have regard to:

  • any conduct, act or omission of the director in relation to notifying ASIC of their resignation, and
  • the reasons for their delay in notifying ASIC.

If an application is made to the Court, it must be done within 12 months (or such longer period as the Court allows) and the Court must be satisfied that it is just and equitable to fix an earlier resignation date.

If you have any questions or need assistance with lodging the correct forms to ensure your resignation as a director is effective, please contact John Sier on (03) 8540 0200 or john.sier@mst.com.au.