In February 2020, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (Phoenixing Act) was passed by Parliament which introduces amendments to the Corporations Act 2001 (Cth).
The Phoenixing Act is aimed at assisting regulators and liquidators to combat illegal phoenixing activities, by prohibiting directors from resigning and then improperly backdating resignations to avoid personal liability.
If ASIC receives a notice of resignation more than 28 days after the purported resignation, the effective date of resignation is the date that ASIC received notice of the resignation. For example, if a director resigns on 1 March 2021 but neither the director or the company notify ASIC until 1 August 2021, the resignation date of the director will be recorded as 1 August 2021. Please also note that late fees would apply in those circumstances.
The date of resignation can only be backdated by application to ASIC or the Court after the 28 day period if they can prove that the director did in fact resign on the purported date. Applications to ASIC must be made within 56 days of the stated resignation date whilst applications to the Court can be made within 12 months of the resignation date or a later time allowed by the Court.
This change will help to ensure that outgoing directors remain accountable for decisions that were made whilst they were a director of the company by preventing outgoing directors from backdating their resignations in an attempt to shift responsibility to any incoming or remaining directors of the company.
The Act also includes measures that seek to prevent directors from resigning where it would leave the company without a director. There are limited exceptions, including that:
- the last director is deceased;
- the company is being wound up or is under external administration; or
- the director never consented to the appointment.
If you need assistance with lodging an application to change the cessation date of a director (and providing reasons) or would like further advice regarding the new changes to director resignations under the Phoenixing Act, please contact our Commercial Team at Burke & Associates Lawyers so that we can discuss this further with you.