When Does Your Resignation As A Director Become Effective?

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.

For professional advice from our team of Commercial Lawyers in Perth, please contact David Vilensky, Les Buchbinder or Alana Shaddick on 9325 9644.

Avoid Being a “Botched” Victim When It Comes to Family Law Advice

Frustrated couple refusing to sign contact containing 'botched' family law advice

I do not know whether you have had the fortune, or misfortune as the case may be, to watch an episode of the reality TV show “Botched”. 

“Botched” follows the daily professional lives of 2 plastic surgeons in Beverly Hills who specialise in fixing up botched jobs done by less experienced and incompetent plastic surgeons.  In other words, all of their patients are former patients of other plastic surgeons and many are disfigured from procedures that have gone horribly wrong.  Hence the title of the reality show.

“Botched” reminds me of the family law practice of Bowen Buchbinder Vilensky (“BBV”).  Many of our clients have been the clients of sometimes, two or even three, other law firms before they eventually end up at BBV.  By the time these new clients come to our experienced and competent family law team, they are very often demoralised, low on funds and have completely lost faith in the legal system insofar as it relates to family law matters.

The lesson for potential clients seeking advice in family law is to avoid being a “Botched” victim.  That is, get good quality advice early in the process from experienced and competent family law lawyers who understand the process and will point you in the right direction from the outset.  This is a specialty of BBV.  The financial benefits of being in good hands early cannot be overestimated.

Put simply, start with the right family law lawyer to avoid having to change lawyers midstream to unwind bad legal or strategic advice provided by inexperienced lawyers.  Avoid wasting time and resources on bad legal advice.

As managing director, I could not be prouder of the family law team working at BBV.  I observe them at work every day.  They are ethical, experienced, passionate, empathetic and highly competent.  Further, they will work on a fixed fee basis so that clients know in advance what fees will be incurred. 

May I share with you a very recent testimonial provided by a satisfied client of the firm on whose behalf we concluded a rather complex family law matter:

            “You and your firm have been my saviour when it comes to sailing the treacherous waters of divorce, consent orders and paperwork. I cannot thank you enough for your advice, thoroughness and organisation. You were understanding, compassionate and have amazing patience.

Words cannot explain my feelings and I am forever thankful.”

If the producers of “Botched” were looking to do a similar series based on the legal profession, they could use the family law team at BBV as the practitioners fixing up the botched jobs caused by less experienced lawyers.

PLEASE CONTACT

If you would like advice in this area please contact David Vilensky at [email protected] 

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What are the Duties of a Company Director?

Company Director fulfilling duties by signing documentation

Directors are responsible for the management and control of a Company.  They are the controlling minds of the Company.

Under common law principles the fiduciary duties of a director can be summarised as follows:

  • To act in good faith and for a proper purpose;
  • To exercise care, skill and diligence;
  • To exercise the powers for the purpose for which they were conferred; and
  • Avoid conflicts of interest.

In addition to the fiduciary duties owed by directors at common law as outlined above, the Corporations Act imposes extra statutory duties which to a large extent restate and reinforce the common law duties imposed on directors.  What is not widely known is the existence in our law of the so-called “business judgment rule” which is contained in section 180(2) of the Corporations Act.  The business judgment rule states, as a general rule, that if a director acts with care and diligence which is reasonably expected of a person with their knowledge and experience and if they act in good faith and for the benefit of the Company, then they will be exercising their duties and obligations to the Company correctly.

More to the point, a director of a Company will have met the requirements under the business judgment rule if they:

  • Make the particular business judgment in good faith and for a proper purpose;
  • Do not have a material personal interest in the subject matter of that judgment;
  • Inform themselves about the subject matter of the judgment to extent they reasonably believe to be appropriate; and
  • Rationally believe that the judgment is in the best interest of the Company.

While the purpose of the business judgment rule is to provide directors with an indemnity from personal liability for breaches of their statutory and general law duties of care and diligence, this defence will only apply if the decision making process is not flawed.  However, if a director departs from the principles of the business judgement rule, he or she will not have the protection afforded by the legislation and could be exposed to personal liability via litigation where it is alleged there has been a failure in the decision making process and the Company has suffered loss or damage as a result.

The potential ramifications that result from a director not meeting their obligations to their Company can be dire.  If the Company enters into a business transaction which sours or fails and the director did not conduct a proper and careful due diligence, that director may be held liable for damages sustained by the Company due to the imprudence of that director.

Caution should therefore always be exercised by a director of a Company before exercising their business judgment or embarking on a transaction which may affect the Company.

PLEASE CONTACT

If you would like advice in this area please contact David Vilensky at [email protected] or Alana Stallard at [email protected] of our corporate advisory team.

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The Importance of a Sole Director Having a Will

Companies that have a person registered as both the sole director and sole shareholder could be taking a big risk if the director dies without leaving a Will.

The company could have difficulty continuing to operate or it could be wound up.

Under the Corporations Act, if a single director of a company dies, the executor or personal representative appointed to administer the deceased’s estate may appoint a new director to the company having obtained a grant of Probate from the Supreme Court. The transitional director has all the powers, rights and duties of the deceased director and can keep the company functioning until shares are transferred to beneficiaries who may then appoint new directors. But if there is no valid will, a relative or other person would have to apply to the Supreme Court for letters of administration to manage the estate. This generally takes longer than an application for a grant of Probate.

While an option would be for the Public Trustee to be appointed to administer the estate, this procedure could take several months. A trading company in this situation would be unable to proceed with financial arrangements, might lose valuable work or incur penalties because it is unable to complete contracts.

It is therefore vitally important that a sole director who is also the sole shareholder of a company makes a valid Will. The Will can even nominate who the testator wishes his or her executor to appoint as a replacement director.

PLEASE CONTACT

Contact David Vilensky at [email protected] if you wish to discuss this matter or your estate planning objectives further.

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