Changes to Director Resignation Laws: Notifying ASIC
In a continued effort to prevent illegal phoenixing in Australia, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth). In addition to a number of initiatives discussed at length in this blog, ASIC now requires that company directors advise ASIC of their resignation and ensure that their resignation does not leave the company without any directors.
Advising ASIC of Resignation
According to section 203AA of the Corporations Act 2001 (Cth), as amended by the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth), resignation will not be effective unless ASIC is notified within 28 days. This notification must include a copy of the letter of resignation that the director provides the company. If ASIC is notified within 28 days, the resignation takes effect on the date the person stopped being a director of the company.
If notification of resignation occurs after 28 days, the date of resignation will be listed as the date that ASIC was notified. This means that directors must act in accordance with their directors’ duties during this time. They remain an acting director, and are thus remain liable for any breaches during this time.
However, the director has the opportunity to apply to ASIC within 56 days or the court within 12 months to alter the date of resignation. ASIC will only alter the date of resignation after consideration of the reasons for delay in notification. Courts will only alter the date of resignation if it is satisfied that it is just and equitable to do so.
Company Board Composition
According to section 203AB of the Corporations Act 2001 (Cth), as amended by the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth), a director’s resignation will not be effective if it would leave the company without any remaining directors.
Companies are required to have one or more directors. There are some limited exceptions to this, such as where a new director is appointed prior to the end of the day, where the company is being wound up, or where the person did not consent to act as director.
Next Steps
If you are a director considering resignation, ensure that you have an understanding of the position of the company and the composition of the board. Understanding new director resignation laws will better ensure that your resignation will be effective. If you have resigned as a director, we can assist you in notifying ASIC or applying for a revision of resignation date in the case of delayed notification.