Resignation of director notification
March 2022 | News | Murray Baird and Sebastian Kostas
Should ACNC registered charities that are ASIC registered companies notify ASIC of changes of directors?
We now recommend that they do. Here’s why.
Under section 111L of the Corporations Act 2001 (Cth), companies that are registered under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) are not required to notify ASIC of certain matters, including change of address and the retirement and appointment of directors and company secretaries. Consequently, ASIC may not have up to date information on its registers for charitable companies.1
The lack of alignment between the two registers causes significant practical and administrative challenges for registered charities and this needs to be addressed.2
The five-year review of the ACNC arrangements (Review Report) recommended that responsibility for the incorporation and all aspects of the regulation of companies which are registered entities be transferred from the ASIC to the ACNC, except for criminal offences.3
The government response to the Review Report was that ACNC and ASIC should work together to reduce the practical and administrative challenges for registered entities dealing with both regulators.4
Sadly, registered charities are still frustrated by the inconsistency between the ACNC register and the ASIC register and particularly the preference of banks to rely on the ASIC register.5
Since the government response, the situation has become more difficult. In February 2021 the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (Act) was enacted with the overarching purpose of combating illegal phoenix activity. The legislation inserted section 203AA into the Corporations Act 2001 (Cth) to the effect that if ASIC is not notified of the resignation of a director within 28 days of resignation, the resignation will not take effect until the notification is made.
This puts a registered charity in the situation that it does not need to notify ASIC of a director resignation but if it doesn’t, the resignation will not be effective.
Prolegis now recommends that a registered charity notifies both ACNC and ASIC of changes in directors and company secretaries to ensure that resignations are effective and other parties who rely on the ASIC register are properly informed.
It is an unfortunate mess that we hope can be sorted out by legislation or at least consistency between the ACNC and ASIC registers.
1 Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislation Review Report and Recommendations 2018 (ACNC Review) at page 109.
2 Queensland Law Society submission to the ACNC Review cited at page 109 of the Review Report.
3 Recommendation 27.
4 Government Response to the Australian Charities and Not-for-profits Commission Legislation Review 2018, 6 March 2020.
5 That is, banks and financial institutions are unable to rely on the assumptions in section 129(2) of the Corporations Act 2001 (Cth).