As a company director, you can't just up and leave. There are new legal requirements regarding updating ASIC. So read on if you want to avoid mountains of paperwork and exposure to director's liability.
Resigning as an employee is fairly straightforward. Obvious, even. Give formal notice, bide your time and then ride off into the sunset. But how on earth should resigning as a company director unfold? And what are a director's liabilities after resignation?
To answer these questions, we'll turn to changes implemented under the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth). These changes came into force on the 18 February 2021, and they relate to the date on which a director's resignation becomes effective.
So, if you're thinking of resigning as a company director, read the next section carefully. Unless you enjoy being buried by a pile of easily avoidable paperwork.
How to resign as a director
Before we dive into the changes, let's take a step back.
Under section 203A of the Corporations Act 2001 (Cth) (the "Corps Act") a director may resign by giving written notice of resignation to the company. However, resignation is not effective if the resignation leaves the company with no director (section 203AB).
But this is nothing new. The Corps Act has always required companies to notify ASIC within 28 days of all appointments and change of directors of the company.
So, what has changed?
From 18 February 2021, the implementation of section 203AA of the Corps Act means that a director's resignation takes effect on:
- where ASIC has been notified within 28 days of the resignation, the date the person stopped being a director; or
- where ASIC was not notified within 28 days, the date ASIC was notified.
What does this mean for the director?
The date that your resignation takes effect will determine how long your duties (and exposure) as a director continue.
And if you do resign as a director, you have to ensure that you or the company updates the ASIC register within 28 days. Because if you don't? Paperwork. Plus ongoing exposure to director's duties until the date that ASIC is notifed of your resignation.
You see, failing to update the ASIC register means you will have to make an application to get the resignation date corrected. This needs to be submitted to ASIC within 56 days of when you stopped being a director. Or if you miss that deadline, an application to the Court within 12 months of when you stopped being a director.
ASIC allows all directors to register for access to update a company's ASIC register. You can do so here.
What's the good news?
The good news is that all of this can be easily avoided. Notify ASIC within 28 days of the director's resignation and you're in the clear. Ride off into the sunset clear.