Changes came in last year which have significantly changed the position as to when a company director's resignation is effective – however, we have noticed that many clients and referrers were not aware of this change, so thought it was opportune to refresh our minds on the current position.
The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (Treasury Act) came into effect on 18 February 2021, which changed when a resignation is effective.
The requirement previously
Section 203A of the Corporations Act 2001 (Cth) (Corporations Act) provided for a director of a company to resign by giving written notice of the resignation to the company at its registered office.
The requirement now
Upon commencement of the amendments in the Treasury Act, new section 203AA was inserted in the Corporations Act as follows, providing that a director's resignation takes effect:
- where ASIC was notified within 28 days of the resignation, the date the person stopped being a director; or
- where ASIC was not notified within 28 days, the date ASIC was notified.
Where to from here
Accordingly, it is imperative that ASIC is notified promptly – otherwise, a director's resignation is not effective and the risks that are associated with the director's role (for example, insolvent trading and other directors duties) remain.
If a director fails to notify ASIC during the 28 day period, an application to ASIC or the Court is the only way to have the date of resignation set to an earlier date – this is a costly step which is certainly not guaranteed to produce an outcome in the director's favour.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
