The process of resigning as a company director has now changed, following the adoption of new federal laws last year. The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2019 was implemented in February 2020 and contains four measures including improving the accountability of Resigning Directors.
Many Directors may not realise that this Bill has changed the ASIC notification process when a director resigns and that there can be serious consequences for them personally when failing to lodge a resignation in a timely manner (within 28 days). Back-dated resignations are prohibited, as is leaving a company without a director.
Preventing Back-dated resignations
Under the Corporations Act, a company is required to notify ASIC of the effective date of a director resignation within 28 days – with late notification resulting in a fine. However, until now there was no limit on late notification as long as the fine was paid.
Under the new rules a resignation notification to ASIC backdated more than 28 days won’t be accepted but will instead be recorded as effective on the actual date of lodgement to ASIC. This means the director will remain liable for company actions & debts until the notification date.
A Director or company may apply to ASIC or the Court to give effect to the resignation if they believe they have sufficient evidence to prove the resignation actually occurred at the earlier date.
Last director resignation has no effect
The new rules also prohibit a director from being removed from a company if doing so would leave the company without a director, unless the company is being wound up.
Under ASIC’s new regulations any submissions to cease the last appointed director without replacing them will be rejected. Hence the last Director will be remain responsible for the company & liable for the debt the company incurs.
The key take-aways from these new rules are:
- When a director resigns its important to have the relevant forms lodged promptly with the ASIC. If we manage your corporate register please contact us as soon as a change in circumstances occurs.
- Failure to notify on time could result in the resigning director being deemed personally liable for matters arising after the date of their actual resignation.
- To fix the resignation date to a date prior to the 28 day notification period applications must be made to ASIC or the Court. Evidence is needed & fees apply.
- The last director resignation has no effect, with the last officeholder remaining in place until a new director is appointed or the company is wound up.
Following are some useful links to the ASIC website:
For further information or to ensure your company officeholders are up to date please contact our office.
Contributed by Kyra Gonsal.