The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (the Act) was introduced on Thursday 18th February 2021 with the purpose of preventing illegal phoenix activity. These new rules will impact when a directors resignation takes place and will prevent resignations from occurring which would leave a company without a director remaining.
The Act will also make company directors personally liable for their company’s GST liabilities in certain scenarios and will hand out penalties for disposing the company’s property for less than market value in an attempt to disadvantage the company’s creditors.
Prior to the 18th February 2021, a director was able to resign by giving notice to the company. The company would than have to inform ASIC of the director’s resignation within 28 days of the resignation date or else they would have to pay a late fee.
The company was also required to inform ASIC of the director’s resignation via Form 484 Change to company details through ASIC’s online services. The effective date of the director’s resignation wasn’t dependent on the company notifying ASIC of the change.
Now that the laws have been changed, when ASIC is not notified of the director’s resignation within 28 days, the effective date of the resignation will be the date of which ASIC is informed.
This means if a director resigns on 1st June 2021 and neither the director or the company informs the ASIC of the resignation until 1st February 2022 than ASICS will record the director’s resignation date on the corporate register as 1st February 2022. Because the notification occurred over 28 days after the actual date the director resigned this means that under the Corporations Act 2001 this director is taken to be still a director during that intervening period.
To change to the earlier date, the director or company are required to apply to ASIC or the court. An application sent to ASIC to change the resignation date will have to be made within 56 days of the claimed resignation date. After this period of 56 days, applications to the court need to be made within 12 months of the directors claimed resignation date.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 also stops companies from removing the final remaining director on ASIC records. This prevents a company being left with no directors. ASIC will reject submissions of Form 484 or Form 370 Notification by officeholder of resignation or retirement that cease the last selected director without replacing that person.
By law a person is still a director of the company, with all the attaching legal obligations under the Corporations Act 2001, until ASIC is notified of the directors resignation.
To make sure their resignation is taken into effect at the appropriate date, a resigning director should strongly consider preparing and lodging ASIC Form 370 Notification by officeholder of resignation or retirement. It is best to do this as opposed to expecting the company to inform ASIC. It is free for a director to lodge a Form 370.
If an Australian company that is incorporated under the Corporations Act 2001 just happens to also be registered with the Australian Charities and Not-for-Profit Commission (ACNC) they will have certain responsibilities listed under the Corporations Act 2001 ‘turned off’, such as certain financial reporting obligations. Despite this, other requirements and offences for breaches of certain directors’ duties under the Corporations Act 2001 continue to apply.
An example of this is section 184 of the Corporations Act 2001 that still applies to the directors and other officers of companies that are charities registered with the ACNC. This part of the Act indicates that directors continue to have a duty to prevent insolvent trading under section 588G; and they must comply with the whistleblower protection regime in Part 9.4AAA.
If a director resigns from a company registered with the ACNC they are encouraged to consider preparing and lodging ASIC Form
A director resigning from a company that is registered with the ACNC should strongly consider preparing and lodging ASIC Form 370 Notification by officeholder of resignation or retirement. It is best to do this as opposed to expecting the company to inform ASIC.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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