Can A Director’s Resignation Be Backdated?
There are over 2000 laws and regulations in Australia that impose personal liabilities on Directors of both private and public companies. These laws and regulations range across areas as diverse as taxation, superannuation, occupational health and safety, insolvency and consumer law.
For these reasons, it is important that when a person resigns as a Director of a company for whatever reason, such resignation is done properly in order to be effective. Failing which a Director can remain personally liable for a range of obligations and liabilities even after they believe they have resigned their position.
Recent amendments to the Corporations Act which came into effect on 18 February 2021 have put into sharp focus the need for resigning Directors to ensure that the appropriate paperwork is prepared and that the Australian Securities and Investments Commission (ASIC) is properly and promptly notified.
Under the recent amendments a Director’s resignation will now take effect on:
- The date that the person ceased to be Director (which requires a formal letter of resignation) if ASIC receives notice of the resignation within 28 days of it occurring; or
- The date the notice is received by ASIC, if ASIC receives notice of the resignation more than 28 days after it has occurred.
It is also worth noting that if the resignation of a Director will leave the company without at least one Director it will not take effect.
When a Director resigns the company is required to notify ASIC within 28 days of the resignation occurring. This is done by filing with ASIC an appropriate Form 484 which can be completed online. This is normally attended to by the company secretary or the external accountants of the company. Prior to the amendments coming into effect, if the company failed to lodge the notification with ASIC within 28 days it was liable only to pay a late lodgement penalty, however, the resignation was still effective from the date of the letter of resignation irrespective of when ASIC was formally notified.
Now, a resignation as a Director will not take effect unless and until ASIC is notified. This prevents the improper backdating of Director resignations and ensures companies are not improperly left without Directors.
Importantly, persons who resign as Directors remain exposed to liability after their resignations unless ASIC are notified within 28 days. Until ASIC are notified the Director resignation is not effective and the exposure continues.
For these reasons the importance of proper company processes which include the prompt notification to ASIC cannot be underestimated.