Director Resignations: New Laws Apply from 18 February 2021
From 18 February 2021 a company director will not be able to backdate their resignation more than 28 days or resign and leave a company without a director.
Backdating resignations was a common tactic used by directors who engage in illegal phoenix activity. The reforms and new changes are aimed at further combating such illegal phoenix activity.
Illegal phoenix activity can involve serious breaches of the law that include directors’ duties, fraudulent concealment or removal of assets and fraud by company officers under the Corporations Act 2001. Penalties include large fines and up to 15 years imprisonment for company directors and secretaries and others involved.
Directors will now have 28 days to lodge their notice of resignation with ASIC, otherwise the resignation will take effect from the date that the notice is lodged.
If the notice is lodged outside of the 28 days, application can be made to ASIC (within 56 days of the claimed registration date) or the Court (within 12 months of the claimed resignation date, unless the court allows a longer period) to fix the date that the resignation takes effect.
Directors will also be unable to resign or be removed by a company if that resignation or removal results in the company being without a director. This limitation does not apply if the company is in liquidation.
If you are concerned about your company, or your directors duties, or require clarification in relation to the new reforms, now is the time to get advice. Please contact our experienced restructuring and insolvency lawyers to ensure the best possible outcome for your circumstances.