Resignation as a company director is not effective unless and until the Australian Securities and Investments Commission (ASIC) is notified.
Companies that are registered as charities with the Australian Charities and Not-for-profits Commission (ACNC) have streamlined reporting obligations. This means that charities are only required to notify the ACNC when directors are appointed or removed. However, amendments to the Corporations Act 2001 (Cth) (Corporations Act) now mean that directors must also notify ASIC in order for the resignation to be legally effective.
Amendments to the Corporations Act
Companies that are registered as charities with the ACNC are exempt from the requirement to notify ASIC if a person stops being a director[1]. Instead, charitable companies are only required to notify the ACNC when a director resigns by updating their details on the Charity Portal.
Section 203AA of the Corporations Act has had an unintended impact on those charitable companies that do not notify ASIC of director resignations. Introduced in the context of combating illegal phoenixing activity, section 203AA of the Corporations Act was intended to prevent the inappropriate backdating of director resignations. Under subsection 203AA(1):
- if ASIC is notified that a person has stopped being a director of a company within 28 days, the person’s resignation takes effect on the day they stopped being a director; and
- in any other case, resignation takes effect on the day written notice is lodged with ASIC stating that the person has stopped being a director of the company.
Although charitable companies are exempt from the obligation to notify ASIC of director resignations, they are not exempt from subsection 203AA(1). This means that directors who have resigned and are no longer serving on a charity board but have not notified ASIC may still be legal directors of the company – with all of the associated duties and responsibilities.
Our recommendation
The charity and not-for-profit sector is advocating for legislative change in this area. However, unless and until this change is made, we recommend that charities consider notifying both ASIC and the ACNC of resignations. For the many charities that have had a longstanding practice of notifying only the ACNC, it would be prudent to restore the historical ASIC register to ensure all director appointments and resignations are noted.
Charitable companies can notify ASIC of appointments and resignations by undertaking the following steps on the Company Portal[2]:
- Start a new form 484.
- Select ‘appoint or cease officeholder’.
- Submit details of the officeholders(s) you would like to appoint or remove.
ASIC may issue an invoice for late fees if changes are made more than 28 days after the appointment or removal occurred. Charitable companies are not required to pay late fees of this kind and should apply for a fee waiver through the Company Portal[3].
Charitable companies should also consider how they document the appointment and resignation of directors. A register of directors can be prepared and maintained for this purpose and reconstructed in the event that it becomes outdated. Our template register of directors can be used to record the details of current and former directors, including their appointment and resignation dates.
How we can help
Moores can assist charities in liaising with ASIC or seeking a fee waiver. We can also provide tailored advice to your board on director resignation and reporting obligations. Please do not hesitate to contact us if you require any assistance in this area.
Contact us
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[1] See section 205B of the Corporations Act.
[2] ASIC no longer accepts paper forms for changes to company details. Companies that are not registered for online access can do so by applying here.
[3] Alternatively, charitable companies can apply for a fee waiver here.