If you are looking to operate an Australian company, you need to 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 relating to directorships. These requirements protect the role and the company, as well as the company’s shareholders. The rules do so by creating certainty about who can and cannot be a director. This article will discuss the circumstances where a permanent resident or non-citizen can be a board director.

What Is a Director?

Shareholders of a company appoint a director to run the company. If you are appointed as a director, you take on some crucial responsibilities to the company. Directors owe 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. 

As a director, it is critical to understand the legal obligations of 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. 

Who Can Become a Director?

Anyone over 18 years old and consents to becoming a director can be validly appointed as a director. However, the rules may vary depending on whether your company is public or private.

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. For private companies with more than one director, a majority of these directors must be an Australian resident. 

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 needs to live in Australia. 

Permanent Residents as Directors

Permanent residents are individuals with a valid visa that entitles them to remain in Australia indefinitely. Anyone who ordinarily resides in Australia can be a resident director. A person with permanent residency is considered to ordinarily reside in Australia.

If you are a permanent resident, you need not worry about whether your status affects your ability to become a director. Permanent residents qualify as resident directors. This means you can be the sole director of a company. 

Non-Citizens as Directors

Non-citizens require a certain set of circumstances in which they can become a director. A non-citizen is someone who does not possess a valid Australian visa or Australian citizenship. Companies cannot form with only one non-citizen director because of the resident director requirement. Non-citizen directors need to make sure that there is at least one other resident director on the board before they can be appointed a director.

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. 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 and permanent residents looking to fill the role or become shareholders need to ensure they meet the requirements and understand the consequences of doing so in Australia. If you have questions about the requirements for company directorship, get in touch with LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page. 

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