Pilot warns directors to avoid being caught out by ASIC’s tighter restrictions with laws effective from today, 18 February 2021.
While the legislation is targeted at illegal phoenix activity, including the improper backdating of director resignations to avoid responsibility, all directors will be impacted.
Where a past director has resigned they may still be deemed to be a director simply if the proper paperwork hasn’t been lodged with ASIC. Further, ASIC will reject your resignation if you are the sole remaining director.
What are the potential risks involved?
Previously failure to advise ASIC of a director resignation would simply result in a late fee to rectify the ASIC records.
Now failure to notify ASIC will mean that a director is deemed to continue in that role beyond the date of resignation. Whilst a director remains in office they are responsible for the oversight of the affairs of the company. A director will be subject to the legal obligations imposed by the Corporations Act 2001 and could potentially expose themselves to personal liability.
What are the key details?
On 18 February 2021, changes to the Corporations Act 2001 (Cth) in relation to director resignations made by the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) will take effect.
The effective date of a director’s resignation will depend on when ASIC is notified as follows:
However, if the resignation will leave the company without at least one director it will not be effective.
The director or the company may make an application to ASIC (within 56 days of resignation) or the Court (within 12 months) for the ASIC records to be corrected to the actual date of resignation.
What directors need to do
Directors should review the ASIC records to ensure they accurately reflect the current directors of the company.
Outgoing directors must ensure ASIC is properly notified of their resignation to avoid any extension to their recorded period of appointment.