The Australian Government has now implemented a series of reforms aimed at preventing illegal 'phoenix' activity associated with bad actors and rogue behaviour in circumstances where a company is liquidated, wound up or abandoned to avoid paying its debts.

One such reform has introduced new section 203AB1 of the Corporations Act 2001 (Cth) for the purpose of preventing directors from abandoning a company and leaving the company without a board. Section 203AB provides that a directors resignation will not be effective if a company does not have at least one director at the end of the day a resignation is supposed to take effect, unless the resignation takes effect on or after the day the company's winding up begins.

For the first time, this new provision has been judicially considered in the matter of Big Village Australia Pty Ltd (Administrators Appointed) [2023] FCA 48. Here, Mathew Russell Hutton and Robert Bruce Smith who were appointed as joint and several administrators of Big Village Australia Pty Ltd sought orders (under section 447A of the Act) to clarify the validity of their appointment in respect of two key issues:

  1. Would the last remaining director (Ms Kracht)2 who purported to appoint the administrators (in circumstances where the company was in breach of section 201A(1) of the Act, which requires that a single director of a company must reside in Australia) invalidate their appointment as voluntary administrators?
  2. Would Ms Kracht's earlier purported resignation as a director (leaving the company without a director in breach of section 203AB) and subsequent appointment of the administrators invalidate their appointment as voluntary administrators?

In the proceedings, the Administrators submitted that it was prudent that this matter be brought to the Court's attention in the context of this application given the lack of judicial consideration of the issue and to dispel any lingering uncertainty that may affect the validity of the Administrators' appointment.

Justice Anderson in reviewing the authorities noted that the Courts have been hesitant to express a concluded view on whether a breach of s 201A of the Act renders the appointment of a voluntary administrator ineffective but that "the better view appears to be that the fact a company has breached s 201A(1) does not affect the ability of the company to function (subject to the provisions of its constitution), and therefore does not affect its ability to appoint an administrator under s 436A of the Act".

In reaching that conclusion Justice Anderson emphasised that the recently introduced anti-phoenix provision (section 203AB of the Act) clearly prevented Ms Kracht's resignation from taking effect despite her attempt to do so and despite the company's constitution allowing for it. His Honour noted that "notwithstanding cl 11.5(c) of the Company's constitution, which provides that "the office of a Director becomes vacant if the Director ... resigns as Director by giving written notice of resignation to the Company ...", she remained the director at the time she passed the Resolutions".

Justice Anderson then considered the factors to be considered by the Courts in granting an order under s 447A and noted they were typically related to situations where major steps in an administration and a subsequent deed of company arrangement have taken place and a challenge to validity only comes much later. In the particular circumstances of this case, His Honour noted that it is nonetheless relevant to consider:

  • (a) the likely insolvency of the Company;
  • (b) the inquiries the Administrators took to confirm the validity of their appointments;
  • (c) the potential disruption that may be caused by a future challenge to the validity of the Administrators' appointment;
  • (d) the conduct of the directors prior to the appointment;
  • (e) any work the Administrators have carried out on the assumption their appointments are valid;
  • (f) whether substantial injustice would be afforded to any party by the making of the orders; and
  • (g) whether making the order is otherwise consistent with the objectives of Part 5.3A.

His Honour consequently made orders pursuant to section 447A of the Act confirming the Administrators' appointment.


Justice Anderson's judicial determination of the effect of section 203AB confirms that a sole director's attempt to resign will not be effective despite what the company constitution provides and regardless of intent.

Any purported resignation by a sole director will be ineffective and they will retain all powers and duties as a director.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific circumstances. It is intended for information purposes only and should not be regarded as legal advice. Further professional advice should be obtained before taking action on any issue dealt with in this publication.


1 Section 203AB came into effect on 8 February 2021 pursuant to the Treasury Laws Amendment (Combatting Illegal Phoenixing) Act 2020 (Cth).

2 Ms Kracht was ordinarily a resident in the United States.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.