The Treasury Laws Amendment (Combating Illegal Phoenixing) Bill 2020 was passed by Parliament in February 2020. This legislation introduces new offences and grants additional powers to ASIC and liquidators to help combat illegal phoenixing. The Australian Securities & Investments Commission has provided the following summary of the objectives and effect of the legislation.
These reforms aim to prevent illegal phoenix activity by holding directors accountable, preventing them from improperly backdating their resignation or leaving their company with no directors.
- Effective from 18 February 2021, companies will no longer be able to cease the last remaining director on ASIC records. To enforce this, lodgements submitted using a 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 will be rejected.
- In addition, if a director’s cessation date is notified to ASIC more than 28 days after the effective date (e.g. director resigned on 1 April 2020, they notify ASIC on 1 November 2020), then the effective date will be overridden and replaced with the lodgement date (i.e. 1 November 2020).
While these reforms are targeted at illegal phoenixing, their application is broad and will impact on ordinary directors and companies too. For example companies should review their existing compliance processes to ensure any changes to company details are promptly notified to ASIC and outgoing directors should ensure their former company lodges a notice of their resignation.
Click here for further information on these new reforms.