Director resignations are no longer effective if ASIC is not properly notified of the resignation within 28 days or if the resignation would leave the company with no directors. Last year the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) amended the Corporations Act 2001 (Cth) to assist regulators and liquidators with 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, amounts owed to creditors and employee entitlements.
Section 203AA of the Corporations Act states that a director’s resignation will only take effect on the original date of their resignation if ASIC is notified within 28 days. If not, the director’s resignation will be the date that ASIC is notified. As such, the practical effect of these changes is that a director will continue to be so until the effective date of their resignation, so the onerous directors’ duties will still apply to them and they may be liable for any actions taken by the company in the interim period.
Additionally, section 203AB provides that a director’s resignation will be void if it means that the company will not have any remaining directors. The few exceptions are where the company is being wound up, the last remaining director is deceased, or the person never consented to act as a director of the company.
These provisions are important for directors to be aware of, as directors may be unable to vacate their position in circumstances where they are the only remaining director.