Changes to director resignations to combat illegal phoenixing activity.

Corporate Update

23 Feb

Written By AGH Law

On 18 February 2021, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (the Act) came into effect, which amends the Corporations Act 2001 (Cth) to prevent illegal phoenixing activity.

The Act prohibits company directors from improperly backdating their resignation or leaving their company with no directors. The Act is aimed at detecting and disrupting phoenix activity, and to prosecute directors and professional advisers who engage in or facilitate the activity.

Pursuant to the Act, if you resign as a director, you or the company need to notify ASIC within 28 days of that resignation. If you fail to notify ASIC within 28 days, your resignation will take effect on the date that the notice is lodged. The effect of this is that a directors’ resignation can only be backdated by a maximum of 28 days.

In order to fix a resignation date that is more than 28 days but less than 56 days, the director or the company must make an application to ASIC within 56 days of the claimed resignation date (via a proposed Form 502) accompanied by payment of an ASIC fee.

In order to fix a resignation date that is more than 56 days but less than 12 months (or such later date as the Court allows), an application must be made to the Court to fix the resignation date. If the court allows a longer period, the Company must also lodge a copy of the Court order with ASIC within 2 business days of the order being granted.

The Act also prevents directors from resigning where the resignation would result in the company not having any directors left (except where the company is being wound up, among other exceptions). A Form 484 or Form 370 which is lodged to effect the resignation of a last standing director will be rejected by ASIC from 18 February 2021.

If you have any queries about these changes, don’t hesitate to get in touch with our team.

Important

The contents of this publication should not be relied upon as legal advice, but instead as commentary and general information. Specific legal advice about your circumstances should always be sought separately before taking any action based on this publication.