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ARTICLE · 18 OCTOBER 2021

New director resignation laws preventing illegal phoenixing have commenced

Cooper Grace Ward
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Director resignations are no longer effective in certain circumstances.

AustraliaCorporate/Commercial Law
Adelaide Hayes
Adelaide Hayes
Tom Jury
Tom Jury
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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.

The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) was passed to amend the Corporations Act 2001 (Cth) and assist regulators and liquidators to combat 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.

ASIC's media release states that the new measures will assist in detecting, deterring and disrupting illegal phoenix activity by preventing directors from backdating their resignations or leaving a company with no directors. While the laws are targeted at hindering illegal phoenix activity, the changes affect all directors.

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