Supreme Court of Victoria finds former director remained liable as a de facto director despite resigning more than eight years earlier.
In Re Perrydotcom Pty Ltd (in liq) [2026] VSC 504 (Perrydotcom), the Supreme Court of Victoria delivered a clear warning: a formal resignation will not necessarily protect a former director who continues, in substance, to perform the functions of that office.
Although Mr Munday’s resignation was recorded with ASIC in August 2015, the Court found that he continued to act in the position of a director until Perrydotcom Pty Ltd was wound up in October 2023. More than eight years after his formal resignation, he was found liable as a de factor director for the company’s insolvent trading and ordered to pay $2,115,967 in compensation to the liquidator.
The decision demonstrates that the Court will look beyond a company’s formal records and examine the commercial reality of how its affairs were managed. A resignation recorded with ASIC will carry little weight if the former director continues to exercise the functions, influence, and authority associated with directorship.
Shadow directors and de facto directors
The Corporations Act 2001 (Cth) recognises that a person may be treated as a director despite not being validly appointed to that position.
A de facto director is a person who acts in the position of a director without formal appointment. By contrast, a shadow director does not necessarily perform the functions of a director but gives instructions or expresses wishes in accordance with which the formally appointed directors are accustomed to act.
The distinction is important as a shadow director operates through the appointed directors, while a de facto director personally undertakes functions that are properly characterised as those of a director.
The commonly cited test for identifying a shadow director was set out in Re Hydrodan (Corby) Ltd (in liq) 2 BCLC 180.
It requires evidence identifying:
- the formally appointed or de facto directors of the company;
- the directions or instructions given by the alleged shadow director;
- that those directors acted in accordance with the directions or instructions; and
- that they were accustomed to do so.
The issue in Perrydotcom, however, was whether Mr Munday’s own conduct demonstrated that he had continued to act in the position of a director after his resignation.
The court’s assessment
Whether a person is a de facto director is not determined by any single act or formal title. The Court considers the nature and extent of the functions performed, the size and structure of the company, its internal practices and the way the person represented their role to third parties.
Relevant indicators include
- signing documents or representing oneself to third parties as a director;
- seeking legal advice and instructing lawyers on the company’s behalf;
- negotiating the acquisition of business assets on behalf of the company;
- negotiating with the ATO and other creditors;
- operating or being a signatory to the company’s bank accounts;
- managing the company’s day-to-day activities; and
- acting as the principal source of information provided to the company’s external auditors.
The Court found that Mr Munday had undertaken several functions ordinarily expected of a director notwithstanding his resignation in 2015. His conduct included:
- providing personal guarantees in connection with the company;
- paying for substantial company expenses from his personal credit card, including the company’s rental obligations under the lease;
- recording the Personal Munday PO Box as the mailing address for Perrydotcom for correspondence from both the ATO and SRO; and
- negotiating payment arrangements with the Australian Taxation Office in relation to substantial tax liabilities and other creditors, including:
- a payment plan with the ATO in respects of BAS debts in the sum of $712,899.00;
- a payment plan regarding debt with Great Western Water.
Put simply, if someone resigns as director but continues to operate as though they are still steering the business, the Court may treat them accordingly. Influence and control can carry consequences, in this case, an expensive one.
Key takeaways
The significance of the decision lies in its timing. Mr. Munday was not insulated from liability because his resignation had been recorded more than eight years earlier. His continuing exposure arose because the commercial reality of his role did not reflect the formal position recorded with ASIC.
Accordingly, a resignation ends a formal appointment, however, it does not necessarily end the statutory responsibilities associated with acting as a director. Former directors who remain involved in a company’s affairs should exercise caution:
- operating company bank accounts;
- negotiating with the ATO, landlords or other creditors;
- approving or paying substantial company expenses;
- instructing the company’s lawyers or advisers;
- making significant operational or financial decisions; or
- otherwise representing themselves as having authority to act for the company.
Where continuing involvement is necessary, the scope of the former director’s role should be clearly defined and documented. The person should avoid exercising authority that is properly regarded as management of the company at the director’s level.
The decision reinforces that an ASIC search may not provide a complete picture of a company’s governance. The practical inquiry is not confined to who is recorded as a director, it also extends to who is actually controlling the company’s financial affairs, negotiating with creditors and directing its operations.
