Change to Director Resignations
Company directors need to be aware of new laws that impact the timing of resignations and the ability to resign
In February 2020, a new law was enacted to help combat illegal phoenix activity, making company directors personally liable for GST liabilities in certain circumstances as well as new penalties for disposing of company assets for less than market value.
As of 18 February 2021, the Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020 also affects when a company director's resignation takes effect and does not allow a resignation if it will leave the company with no directors.
Directors need to be aware that notification dates are very important for ensuring that they are not continued to be held liable beyond their resignation date.
What's changed with the new amendments to the Act?
Effective Date of resignation
Before these changes, a director could resign by giving notice to the company, which was then required to notify ASIC about the resignation within 28 days or be subject to a late fee. ASIC would be notified via Form 484 to update the company's details via it's online ASIC Connect, however the date of the resignation was not dependent on the company notifying ASIC of the change.
The new law means that if ASIC is not notified within 28 days, then the effective date of the resignation is when ASIC is actually notified. For example, if a director resigns on 1 December 2020 but ASIC isn't notified until 1 March, they are considered to still be a director until 1 March.
The impact of this for directors is that the effective date is then recorded as the date notified and if there is any gap between the date of the director's resignation and ASIC being notified, for the purposes of the Corporations Act, the person is considered to be a director up until the notification date.
To change the date, the company or director will have to apply to ASIC or the court and the windo(cannot guess what it should be) for correcting notification dates is 56 days from the point of the claimed registration date.. After that time, applications to the court generally need to be made within 12 months of the claimed resignation date.
A company cannot remove the last remaining director on ASIC's records
ASIC will reject a company director resignation if it means that the company will be left without a director without being replaced with a new director.
What this means is that under the new law, a person remains a director of the company and the obligations under the Corporations Act 2001 until ASIC is notified and can not resign as director if it will leave the company without one.
Directors of registered charities are not subject to some of the regulations of the Act however are still subject to breaches of the Act, must ensure that their charity does not undertake insolvent trading, and they must comply with the whistleblower protection aspects of the act.
Where to get more guidance
If you or another director in your business are intending to resign and potentially impacted by these changes, speak to your accountant. Please contact us on 02 9957 4033.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.