Company Director Resignations Bulletin
Friday, June 18, 2021
Company Director Resignations: new laws
- The Australian Governmenthas introduced new laws to help combat illegal phoenix activity
- From 18 February 2021, a company director will not be able to backdate their resignation more than 28 days or resign if it means the company would be left without a director
- Backdating resignations was a common tactic used by directors to engage in illegal phoenix activity
Illegal phoenix activity
The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 was enacted in February 2020 to help combat illegal phoenix activity. Illegal phoenix activity involves creating a new company to continue the business of an existing company that has been deliberately liquidated to avoid paying outstanding debts, including taxes, creditors and employee entitlements.
Reforms coming into effect 18 February 2021
The reforms prohibit company directors from improperly backdating their resignation or leaving a company with no directors.
From 18 February 2021, the resigning director or the company will need to notify ASIC of a director resignation within 28 days. Where ASIC is not notified within 28 days, the effective resignation date will be the document lodgement date.
For example, if a director resigns on 1 March 2021 and does not notify ASIC of their resignation until 1 August 2021, ASIC will record their resignation as 1 August 2021 on the corporate register. To fix an earlier date, the company or director must apply to ASIC or the court.
Should you have any concerns or queries in regards to the above changes, please do not hesitate to contact our office.