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Can a Permanent Resident or Non-Citizen be a Company Director?

If you want to operate an Australian company, you must ensure that you can legally be a company director. The role is a vital part of any company, and as a result, there are regulations you need to comply with. The Corporations Act 2001 sets out the requirements for directorships, creating certainty about who can and cannot be a director. This article will explore whether a permanent resident or non-Australian citizen can be a company director.

What is a Director?

A director is a member of a board responsible for overseeing and guiding a company’s strategic direction and management. Shareholders of a company will appoint a director(s) to run the company. 

As an appointed director, you take on some crucial responsibilities, in particular, special fiduciary duties to the company. Those duties require you to act in the best interests of the company and its shareholders when making managerial decisions.

Understanding and complying with your legal obligations is critical when managing a company. Failing to do so can put you in a vulnerable position. If you breach your fiduciary duties, you could be legally responsible for debts accrued as a result of your conduct. There are even potentially criminal charges for serious breaches.

Some of the key duties under the Corporations Act are to:

  • act in the best interests of the company and its shareholders;
  • refrain from favouring personal interests above the company’s;
  • stay updated about your company’s financial status and make decisions that align with it;
  • avoid exploiting any information for personal gain within the company;
  • embrace advice from colleagues and don’t hesitate to seek assistance; and
  • treat company assets carefully and manage debts responsibly to prevent insolvency.
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Who Can Become a Director?

Under the Corporations Act, a director must:

  • be at least 18 years of age;
  • consent in writing to take on the role and responsibilities of a director; and
  • where a company only has one director, ordinarily reside in Australia.

Where a company has more than one director, at least one of them must reside within Australia.

Accordingly, permanent residents of Australia can be company directors.

However, the rules may vary depending on the type of company you operate. 

Private Companies (Pty Ltd) 

If your company is private, you can form the company with only one director as long as that director is also an Australian resident. This is the resident director requirement.  

Public Companies (Listed or Unlisted)

For public companies, there needs to be a minimum of three directors and a company secretary. At least two of these directors need to live in Australia. 

Companies Limited By Guarantee 

For companies limited by guarantee, traditionally not-for-profits, charities or special purpose companies, there must be a minimum of three directors, a company secretary and a member. At least one of the directors must normally reside in Australia.

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Who Cannot Be a Director?

Under the Corporations Act, you cannot be a director if you:

  • are below the age of 18;
  • have an undischarged bankruptcy;
  • have entered into a personal insolvency agreement and have failed to fulfil the terms;
  • have been banned by ASIC or a court from managing corporations; or
  • have been convicted of dishonesty-related offences.

Non-Citizens as Directors

A non-citizen can meet the requirement of a ‘resident director’. Under the Corporations Act, there is no clear definition of what it means to ‘ordinarily reside in Australia’. Being a resident for tax purposes is a strong argument. The relevant individual must also possess a visa that allows them to remain in the country. The resident director does not need to be the same person, and another person can meet this criteria if you expect the original resident director to no longer remain in the country.  

Requirements for Shareholders

If you are a permanent resident or non-citizen and want to purchase shares in an Australian company, you are able to do so. Shareholders are not subject to the same stringent requirements as directors. Further, there is nothing in the Corporations Act that regulates whether foreign persons or entities can purchase shares.

However, there are potential tax implications if you seek to buy shares as a permanent resident or non-citizen in Australia. Before purchasing Australian shares, it is important that you understand the laws concerning foreign-owned assets in Australia as well as in your country of residence. 

Key Takeaways

Becoming the director of a company is a vital role with important duties toward the business. Non-citizens looking to fill the role or become shareholders must ensure they meet the requirements and understand the consequences of doing so in Australia. 

Seeking professional guidance ensures compliance with all relevant laws and regulations. Immigration lawyers or business advisors specialising in company directorship can provide valuable insights and help navigate the complexities involved.

If you have questions about the requirements for company directorship, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

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Brinley Meagher

Brinley Meagher

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