In February 2020, the Australian business landscape witnessed a pivotal change with the introduction of the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020. This legislation emerged as a robust shield against the perilous practice of illegal phoenixing, where a new company emerges from the ashes of a deliberately liquidated one to evade debts. This act serves as a beacon of integrity, preventing company directors from engaging in improper backdating of resignations or leaving their companies without directors.
Understanding the New Resignation Landscape:
Under the amended law, a notable change surfaces in the reporting requirements concerning director resignations. Failure to notify the Australian Securities and Investments Commission (ASIC) of a director’s resignation within 28 days results in the lodgement date of Form 484 becoming the effective resignation date. This shift aims to instil accountability and ensure timely reporting.
Navigating Resignation Date Alterations:
In the event a director wishes to amend their resignation date to an earlier one, the path to rectification diverges into two routes. Within 56 calendar days of the original cessation date, directors can approach ASIC through Form 502, accompanied by a fee and reasons for alteration. Alternatively, for cases extending beyond this window but within 12 months of the initial date, a court application can be made, provided an approved court order is subsequently lodged with ASIC.
The Dawn of Effective Resignation Date:
As of 18 February 2021, a significant evolution surfaces in the domain of director resignations. In the aftermath of stepping down as a director, both the departing director and the company must duly inform ASIC within 28 days. Failing to adhere to this timeframe results in the lodgement date becoming the de facto resignation date. An illustrative example would be a resignation on 1 March 2021, with subsequent notification on 1 August 2021, leading to a recorded resignation date of 1 August 2021, coupled with associated late fees.
Summary of Crucial Points:
- Director’s Status: Resignation, retirement, or removal from an Australian company brings a cessation of obligations, yet potential liabilities linger.
- Process Formalities: A proper resignation process entails following precise procedures to eliminate a director’s presence from the records.
- Governance Compliance: The process hinges on the company’s governance structure, including its constitution and replaceable rules.
- Replaceable Rules: A basic set of rules, these offer a foundational framework for company management.
- Resignation via Replaceable Rules: Directors can resign by providing written notice, and proprietary companies can remove and appoint directors through resolutions.
- Sole Directors and Proprietary Companies: The rules vary based on the company’s structure, with replaceable rules automatically applying when additional directors are appointed.
- ASIC Notification: Directors can inform ASIC about their resignation or removal, supported by a copy of the resignation letter.
- Phoenixing Counteraction: The 2020 Act combats illegal phoenixing practices, ensuring directors can’t improperly backdate resignations or leave companies director-less.
- Timely Notification: Directors must notify ASIC within 28 days of resignation from 18 February 2021.
- Date Alteration: Resignation dates can be amended through ASIC or the court, with specific timeframes and procedures.
- Last Director Resignation: To maintain active directorship, the last director cannot resign without a replacement.
In conclusion, this blog post unravels the intricacies of director resignations and the new landscape sculpted by the Treasury Laws Amendment Act. As the Australian business realm evolves, understanding these guidelines becomes paramount for directors and companies alike.
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