In early 2020, the Federal Government enacted the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (the Act) to combat illegal "phoenixing activity". Phoenix activity normally involves the transfer of assets from one company to another to avoid the first company's creditors.
The Act contains a number of reforms that came into effect on 18 Feb 2021, which focus on measures to prevent directors from improperly backdating resignations or ceasing to be a director where this would leave the company with no directors. The measures include:
- A resigning director or the company will need to notify ASIC of a director resignation within 28 days;
- Where ASIC is not notified within 28 days, the effective resignation date will be the date on which the notice is lodged with ASIC. E.g. if a director resigns on 1 March 2021 and does not notify ASIC of their resignation until 1 August 2021, ASIC will record their resignation as 1 August 2021 on the corporate register;
- A resigning director or the company may apply to ASIC or the Court to fix an earlier date if they believe they have sufficient evidence to prove the resignation actually took place at the earlier date; and
- The reforms also prohibit companies from removing the last remaining director on ASIC records, leaving the company with no directors. ASIC will now reject submissions of Form 484 Change to company details or Form 370 Notification by officeholder of resignation or retirement to cease the last appointed director without replacing that appointment.
A number of other measures included in the Act cover the personal liability of company directors, ATO retention of tax refunds, and creditor-defeating disposition penalties.
If you have any questions relating to the Act, or how this might impact you or your company, please contact our Commercial Law experts on 1800 650 656. We're here to help!
David Killen | Solicitor