James Creevy and Mitchell Harding, current as of: 14 May 2025.
A recent case heard before the Federal Court, One Tree Agriculture Pty Ltd v Lye [2025] FCA 126, is a potent reminder to advisers and their clients about the importance of following proper procedures when incorporating companies and appointing company directors.
The case was centred around a critical legal requirement: before someone becomes a company director, they must consent in writing to being appointed as director. This applies whether you’re incorporating a new company or appointing someone as director of an existing company. The requirement is outlined in section 201D of the Corporations Act, and it’s a requirement that has no exceptions and therefore cannot be overlooked.
In this case, a husband and wife were involved in running a business through a company that was setup with the wife appointed as the sole director and shareholder. Later, she resigned from the role of director and the husband was appointed in her place. After he was declared bankrupt and ceased as director, the wife was re-appointed to the role. Once his bankruptcy was discharged, the couple said he had resumed the director role and she had stepped down again.
Critically, despite their assertions of the husband being re-appointed to the office of director and the wife simultaneously ceasing from that office, there was no written consent, no proper documentation, and ASIC records were never updated to reflect the changes.
When the company faced insolvent trading claims and the wife’s personal assets, including the family home, were subject to claims made by creditors, they tried to argue in Court that the husband had actually been the director during the relevant period. The Court was asked to order that the change of directors be made effective at a date before the company became insolvent—but the date that was requested came outside the 28-day limit allowed under the law for notifying ASIC about directorship changes.
The husband argued that he failed to sign a consent to act prior to being appointed and failed to notify ASIC of his appointment due to being depressed. However, it was noted that the husband was actively involved in the running of the business that was operated through the company at the time in question. Due to this, his argument that he didn’t formalise his appointment because of depression failed. Essentially, if he could be actively involved in the business, then he could’ve done what was required to formalise his appointment as director.
The Court made it clear that responsibilities and duties imposed on directors are paramount, including those of an administrative nature, and failing to fulfill those responsibilities may expose the company and its officeholders to legal consequences.
The judgment also reinforced the purpose of the anti-phoenixing measures imposed by Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) with one of the intentions of those measures to ensure that changes to the office of director of a company can’t be backdated to evade liability. If a person hasn’t consented in writing—or at the very least, clearly acted with the company’s knowledge as a director—their appointment can be ruled invalid.
The case is a stark reminder for advisers to reminder their clients that if someone is going to be a director, that person must consent to their appoint in writing and that written consent must be retained with the company register. In addition to being a formal requirement, it also protects the company, the directors, and the people advising them.
At Acis, we ensure every company structure is backed by accurate documentation and expert legal oversight, so nothing falls through the cracks. Our platform makes it easy for advisors to stay compliant with ASIC requirements, including director consents and company registers.
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