When a Director Leaves, resignation, Removal and the ASIC Notification Clock

When a director leaves a small company, the departure usually feels like an internal matter: a resignation letter, a farewell, a reshuffle of who attends the next meeting. Legally, though, a departure is a transaction between the company, the director and the corporate regulator, and its details are published on a public register that creditors, lenders and courts rely on. Get the process right and the change is routine. Get it wrong, and a person who thought they resigned years ago can still be recorded as a director, still be pursued for the company's debts, and still face penalties.

This article sets out how director departures actually work under the Corporations Act 2001 (Cth) (the Corporations Act): the two ways a director can leave, when the departure takes effect, the notification obligations that follow, and the issues that survive the departure. It is most relevant when a founder, director or key manager of a proprietary company is stepping down, whether on good terms or not.

Who does what when a director leaves

Four actors are involved in every director departure, and each has a distinct role:

The departing director: resigns by giving written notice to the company, or is removed by a decision of the members.
The company: records the departure, updates its own records and lodges the required notice with the Australian Securities and Investments Commission (ASIC) within 28 days.
The members: hold the power to remove a director of a proprietary company by resolution and to appoint a replacement.
ASIC: maintains the public register of directors, rejects lodgements that would leave a company with no directors, and can fix a resignation date in limited circumstances.

Resignation: the written notice is the starting point

For most companies, resignation is governed by s 203A of the Corporations Act 2001 (Cth), a replaceable rule that allows a director to resign by giving written notice to the company at its registered office. Because it is a replaceable rule, it applies automatically only where the company's constitution does not displace it. If your company has its own constitution, check what it says about resignation before anything happens. It may require notice to a different address, a minimum notice period, or some other formality.

What the Act does require is the written notice. Departures arranged by conversation are a recurring source of disputes. In One Tree Agriculture Pty Ltd v Lye [2025] FCA 126, the Federal Court noted that a director's purported resignation by a vague conversation did not satisfy the requirements of the company's constitution or the Corporations Act. If the paperwork is not right, the departure may never have happened in the eyes of the law, whatever the parties intended.

Removal: the members hold the power

A director can also leave because the company removes them. The route depends on the type of company.

For a proprietary company, s 203C of the Corporations Act (also a replaceable rule) allows the members to remove a director by resolution, and to appoint another person as a director by the same resolution. This is a members' power, not a board power. The Act gives the directors of a proprietary company no general right to remove one of their own; if the board wants that power, it must be written into the constitution. The practical point is simple: for the typical small company, removal means a members' resolution, properly passed, documented and retained in the company records.

Public companies face a more structured regime. Under s 203D, the members may remove a director by resolution despite anything in the constitution or an agreement with the director, but at least two months' notice of the intention to move the resolution must be given, and the director is entitled to put their case to the members. Section 203E goes further: any resolution or request by the directors of a public company that purports to remove a fellow director is void.

When the departing director is also an employee

If the director being removed is also an employee, such as an executive director, removal from the board does not by itself end the employment relationship. Ending that employment is a separate step, and if it amounts to a dismissal it may attract the unfair dismissal protections of the Fair Work Act 2009 (Cth). Those protections are only available to employees who have completed the minimum employment period, which is six months, or 12 months where the employer is a small business. Whether the departing director is protected, and how to structure the exit, is a question a lawyer can assess against the specific circumstances.

When the resignation takes effect: the 28-day clock

Until 2021 it was possible for a resignation to be backdated almost indefinitely, a tactic associated with illegal phoenixing. The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) changed the rules, and from 18 February 2021 s 203AA of the Corporations Act ties the effective date of a resignation to the lodgement of the notice with ASIC.

The rule works like this. If ASIC is notified within 28 days of the day the director stopped being a director, the resignation takes effect on that earlier day. If the notice is lodged later, the resignation takes effect on the day the notice is lodged with ASIC. In practical terms, a resignation can now only be backdated by up to 28 days. A director who resigns on 1 March but is not notified to ASIC until 1 August will be recorded as resigning on 1 August, exactly as ASIC has explained in its guidance on the reforms.

Fixing a missed date

If the 28-day window has been missed, s 203AA(2) allows an application to fix the earlier date as the effective date of the resignation. The application can be made to ASIC within 56 days of the claimed resignation date, or to a court within 12 months. ASIC will have regard to why the notification was delayed, and a court must be satisfied that it is just and equitable to fix the date.

The recent decision in One Tree Agriculture Pty Ltd v Lye [2025] FCA 126 shows how much can ride on this. The company had not lodged notice of a director's resignation within 28 days, and the director applied to the Federal Court to fix her resignation date to an earlier day. The court dismissed the application. The consequence was that the director remained on the register for longer than she intended, and remained exposed to a claim of around $545,000 against her for the company's insolvent trading.

The last director rule

Section 203AB adds a second rule: a resignation does not take effect if it would leave the company with no directors at all. The exception is where the company is being wound up. ASIC will reject a lodgement that removes the last director without a replacement. So a sole director who wants to leave cannot simply resign. Either a replacement must be appointed first, or the company must be wound up or deregistered.

Notifying ASIC

Once a director leaves, the company must lodge a notice with ASIC within 28 days of the change. This is a statutory obligation under s 205B of the Corporations Act, and the notice is lodged through the ASIC portal using Form 484, Change to company details. The obligation sits on the company, although the departing director can also notify ASIC directly, in which case the company's obligation is satisfied. Failing to lodge on time is a strict liability offence, meaning the company can be penalised without any proof of intention, and the late lodgement shifts the effective date of the resignation as described above. The same 28-day window applies whether the director resigned or was removed.

Keeping the board legal: replacements and minimum numbers

A proprietary company must always have at least one director, and that director must ordinarily reside in Australia. A public company must have at least three directors, two of them ordinarily resident in Australia. This is why the sole director scenario is a trap: the resignation cannot take effect if it leaves the company without a director, so the members must appoint a replacement first.

Appointment itself is straightforward. The members can appoint a director by ordinary resolution, and under the replaceable rule in s 201H of the Corporations Act the existing directors can appoint an additional director to fill a vacancy. If the departing director is the sole director and sole shareholder and wants to close the business down rather than hand over control, resignation may not be the right route at all. Deregistration or a formal winding up may be more appropriate, and a lawyer can help compare the options.

What survives the departure

Resigning or being removed does not wipe the slate clean. The statutory directors' duties in Chapter 2D of the Corporations Act apply while a person holds office, but liability for breaches committed during that time survives the departure. The most common example is insolvent trading: a person can be liable for debts the company incurred while they were a director, even if they resigned before the debt was demanded. Under s 588M of the Corporations Act, that liability follows the director personally. In One Tree Agriculture, this was exactly the exposure the departing director was trying to escape by fixing an earlier resignation date.

If the departing director is also a shareholder, the exit has a second dimension. A shareholders' agreement will usually set out what happens to shares on departure, commonly through pre-emptive rights giving existing shareholders first refusal, a buy-sell mechanism and a valuation method. Where there is no shareholders' agreement, the constitution's share transfer provisions apply, and a departing director is generally free to keep their shares unless the constitution or an agreement compels a transfer. These documents should be reviewed before the departure is announced, because the order of events can affect how the share transfer provisions operate.

Phoenixing: why backdated resignations are now banned

Backdated resignations were a signature of illegal phoenixing. A director of a failing company would resign with effect from a date before the company's debts were incurred, then start a new company to carry on the same business, leaving creditors and the Australian Taxation Office with nothing. The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth), enacted in February 2020, was aimed at this conduct, and the resignation rules in ss 203AA and 203AB commenced on 18 February 2021.

ASIC has said the reforms stop directors from improperly backdating their resignation or leaving a company with no directors, and it will reject a Form 484 or Form 370 lodgement that would remove the last director without a replacement. ASIC also warns that serious phoenixing conduct can attract large fines and imprisonment of up to 15 years.

Where a lawyer helps

A director departure is one of those moments where a small amount of legal input early saves a disproportionate amount of trouble later. A corporate lawyer can:

check what the constitution, the replaceable rules and any shareholders' agreement require before anyone acts;
draft the resignation notice or the removal resolution so the departure is effective;
manage the meeting and notice requirements, including the two-month notice rule that applies to removals in public companies;
lodge the Form 484 within the 28-day window and handle any ASIC queries;
apply to ASIC or a court to fix a resignation date where the window has been missed; and
deal with the employment side of an executive departure, including any unfair dismissal exposure and the terms of any exit.

The date on the register is the date that counts

For everyone outside the boardroom, the date that matters is the one on ASIC's register, not the date of the handshake or the farewell email. That date marks when the company stopped being the departing director's responsibility, and when the departing director stopped being exposed to the company's debts. It is decided by a single administrative act: lodging the notice within 28 days. Miss the window and the resignation takes effect only when it is lodged, with correction available only through a formal application to ASIC within 56 days or a court within 12 months, on just and equitable grounds. Documenting the departure properly and lodging on time is the cheapest way to protect both the company and the departing director. If you are facing a departure and want the paperwork reviewed before it happens, a free consultation with a commercial lawyer is a low-cost way to check that the process is right.