Director Resignations: New ASIC Laws Apply From 18-Feb-2021

news-director-resignations-new-ASIC-laws apply-from-18-February-2021

ASIC announced that effective from 18 February 2021, new requirements will apply when ceasing a company director.

IN BRIEF:

  • A director cessation to be intimated to ASIC within 28 days by lodgement of ASIC Form 484 – if ASIC is not informed of a director resignation within 28 days, the date on which the change Form 484 is lodged will be taken as the effective date of resignation (e.g. director resigned on 1 April 2020, ASIC is notified on 1 November 2020, then the effective date will be overridden and replaced with the lodgement date (i.e. 1 November 2020). Late fees shall still apply.
  • To then change a resignation date, directors will have to apply to ASIC or the Court. There will be an application fee for this.
  • The last director of a company cannot cease unless replaced by another director.


Background

In February 2020, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 was passed by Parliament. Taking effect from 18 February 2021, this legislation introduces new offences and grants additional powers to ASIC and liquidators to help combat illegal phoenixing and avoid systemic fraud.

The amendments aim to prevent illegal phoenix activity by holding directors accountable, preventing them from improperly backdating their resignation or leaving their company with no directors.



What are the changes?

From 18 February 2021, companies can no longer cease the last remaining director on ASIC records. To enforce this, lodgements submitted using a Change to company details, or Form 370 Notification by officeholder of resignation or retirement, to cease the last appointed director without replacing that appointment will be rejected.

There are some exceptions to this, including if: 

  • the last director is deceased
  • the company is being wound up or under external administration; and
  • the officeholder never consented to the appointment.


In addition to the above changes, if a director’s cessation date is notified to ASIC more than 28 days after the effective date (e.g. director resigned on 1 April 2020, they notify ASIC on 1 November 2020), then the effective date will be overridden and replaced with the lodgement date (i.e. 1 November 2020). Late fees still apply to the Change of company details form in this scenario.

Directors can apply to ASIC or the Court to change a resignation date. There will be an application fee for this. These changes are intended to stop directors deliberately backdating cessations to avoid legal responsibility to creditors.

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Azure Group
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Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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