Importance of filing director resignations on time
Corporate News - 18 February 2021
As part of reforms introduced in early 2020 to target phoenix activity, amendments were made to the Corporations Act 2001 (Cth) (Corporations Act) to prevent the improper backdating of director resignations and to ensure that companies are not improperly left without directors. The effective date of those measures was initially deferred for 12 months. As of 18 February 2021, and pursuant to new sections 203AA and 203AB of the Corporations Act, a director’s resignation will now take effect on:
- the date that the person ceased as a director, if ASIC receives notice of the resignation within 28 days of it occurring;
- the date the notice is received by ASIC, if ASIC receives notice of the resignation more than 28 days after it occurred; or
- if the resignation of that director will leave the company without at least one director – it will not take effect. A similar restriction applies where a director is removed by resolution of members. Exceptions apply where the company is being wound up.
What does this mean?
This means that instead of a fine for late notice, failure to notify ASIC of a director’s resignation within the 28 day timeframe may mean that the director’s liability is extended beyond their term of appointment. It will be possible for directors or the company to make an application to ASIC (within 56 days of cessation) or the Court (within 12 months of cessation) to fix a resignation date. However, whilst ASIC will consider the applicant’s conduct with respect to the notification and any reasons for the delay, the Court will only fix a date if they are satisfied it is just and equitable to do so.
This highlights the importance of keeping ASIC records up to date and ensuring that company processes allow for prompt notification to ASIC.
Please contact us at our Perth office on +61 89321 4000 or our Melbourne office on +61 39111 9400 if you require any further advice on these issues.