Resigning directors – when does Elvis leave the building?

In 2019, the Federal Government introduced legislation to clarify precisely when a director is taken to have resigned from a company.

Prior to that, in the Bad Old Days, directors were able to allege that they had resigned weeks, months, even years before, then lodge a notice with ASIC of the resignation, and their resignation was taken to have been valid from the date of the alleged resignation rather than the ASIC lodgement date. The reason for misusing the system in this way is obvious: a director could allege they were not a director when the company may have been trading whilst it was insolvent[1].

A recent decision of the NSW Supreme Court (In the matter of Mosaic Brands Ltd) [2] has confirmed the Court’s power to fix the valid resignation date where it is just and equitable to do so.

Background

Jaqueline Frank tendered her resignation as a director to the board of Mosaic Brands Ltd on 15 June 2024. By a further email to the Chairman on 18 June 2024, Ms Frank expressed that her resignation was to be effective immediately.  The company had then announced the resignation to the ASX, but the Company did not lodge the record of the resignation until 8 August 2024. Ms Frank then filed her Supreme Court application on 17 June 2025, almost a year after her “immediate” resignation. She sought orders that her resignation be fixed to 18 June 2024.

Since Ms Frank’s resignation, Voluntary Administrators, as well as Receivers and Managers, had been appointed to Mosaic Brands, Australia’s largest specialty fashion retailer.  Whilst the judgment is silent on her reasons for resigning, the need to ensure Ms Frank’s resignation was recorded when it actually happened may be material to a subsequent liquidator’s views about her potential personal liability. Neither the Administrators nor the Receivers opposed the application.  ASIC was also notified the application and also did not oppose it.

What the law says

The Courts have recognised that the purpose of section 203AA  of the Corporations Act 2001 is to ensure that persons who deal with a company can rely on ASIC’s register as actively recording those who have control of the company as directors[3].

The “new” Section 203AA of the Corporations Act relevantly provides that a person’s resignation as a director of a company takes effect on the day the person stops being a director, if ASIC is notified of that fact within 28 days, or otherwise the day on which notice is lodged with ASIC stating that the person has stopped being a director of the company.  An application can however be made to the Court to fix the date of the resignation under s203AA(2) of the Act. Section 203AA(3) in turn provides that the Court must not fix the resignation day at the day the person’s resignation takes effect unless it is satisfied that it is just and equitable to do so.  Section 203AA(5) contemplates that any application must be made to the Court within twelve months after the date the person ceased being a director of the relevant company or otherwise such longer period as the Court allows.

Court findings

The Court found that, despite the absence of serving a “notice” of the resignation on the registered office of the company, the email from Ms Frank to the Chairman of the board was sufficient.

The Court application was necessary because the company had failed to lodge the resignation with ASIC within 1 month of receiving it. The company wanted to accept the resignation at the next board meeting at the end of June, but Justice Black found that Board acceptance was not needed to validate the resignation, nor fix the date of it.

Curiously, the Court did not provide express reasons why the circumstances gave rise to a “just and equitable ground” for making the orders. There was no mention of any prejudice that Ms Frank would have suffered if the order was not made. Justice Black just concluded that the background facts provided the necessary grounds.

Lessons for directors

Whilst section 203AA of the Corporations Act has been in place for more than 5 years, some directors and boards still operate as they have done in the distant past when a director resigns.  Unfortunately, extended delays in having a director formally removed from the company’s register with ASIC can expose that director to liabilities whilst the (perhaps) insolvent company may continue to incur debts. For public companies, the exposure is even greater with continuous disclosure requirements upon the directors.

It is important that a resigning director provides written notice of the resignation to the company. A company’s Constitution may also have specific resignation notice requirements which an outgoing director should follow.

Individual directors do not usually hold the ASIC “corporate key” required for the online ASIC registry access, which is needed to record a company’s change of directors. For that reason, the director should determine the location of the corporate key, and require that the resignation be registered online with ASIC within 28 days of the resignation, wherever possible.

It is equally important for the company to acknowledge receipt of the written notice and to process the resignation via ASIC within 28 days of its receipt to avoid the need for a director to have his or her resignation date fixed by a Court.

When done properly, when you “leave the building” as a director, you have legally left, and you don’t remain exposed on the ASIC register longer than you should be.

[1] Which exposes the director to personal liability under section 588G of the Corporations Act 2001

[2] In the matter of Mosaic Brands Ltd (admins apptd) (recs & mgrs apptd) [2025] NSWSC 722 (30 June 2025) per Black J.

[3] One Tree Agriculture Pty Ltd v Lye [2025] FCA 126 per Derrington J