Running a company in Australia means following strict legal and regulatory rules. Businesses must comply with the Corporations Act 2001 (Cth), which sets out important guidelines. These rules are enforced by the Australian Securities & Investments Commission (ASIC), the country’s main corporate regulator, ensuring companies operate fairly and transparently.
One important rule is the ‘resident director rule,’ which requires companies to have a director based in Australia. However, there are ways to manage the challenges of meeting this requirement. Below, we’ll break down the key rules you need to know about resident directors in a clear and simple way.
The ‘Resident Director Rule’ in Australia
Every company registered in Australia must have at least one director who is an Australian resident. This can be an Australian citizen or a migrant who lives and works in the country.
For public companies, the requirement is stricter that means you need at least two resident directors, plus a third director who can be based overseas.
For many international businesses, meeting this residency rule can be a challenge when setting up operations in Australia.
Section 201A of the Corporations Act 2001 reads:
Minimum number of directors
Proprietary Companies
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Must have at least one director, who must ordinarily reside in Australia.
Public Companies
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Must have a minimum of three directors (excluding alternate directors), with at least two residing in Australia.
A person cannot be a company director if they:
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Are bankrupt and have not been discharged or have not followed a personal insolvency agreement.
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Have been banned from managing companies by ASIC or a court.
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Have been convicted of crimes involving dishonesty, such as fraud.
For more details, visit ASIC’s guide on How to Become a Director.
Why Does Australia Require Resident Directors?
Australia enforces the ‘resident director rule’ to ensure companies follow local laws and regulations. This rule helps maintain transparency and accountability, preventing businesses from being controlled by overseas individuals who might evade Australian authorities.
A resident director must meet their legal responsibilities under the Corporations Act, which is strictly monitored. They must also have a director identification number (DIN) to enhance accountability and traceability.
Australia has a strong corporate regulatory system, with ASIC keeping a close watch on corporate misconduct. This focus has intensified, especially after major events like the Global Financial Crisis in the late 2000s and the Banking Royal Commission.
Strict regulations, such as the ‘resident director’ rule, play a key role in strengthening accountability and ensuring businesses operate responsibly.
Duties of Resident Directors
Resident directors of Australian companies have a duty to act in the best interests of the company. This is their most important responsibility. Key obligations include:
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Making decisions that benefit the company, not personal interests.
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Staying informed about the company’s financial position.
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Basing decisions on accurate financial information.
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Avoiding misuse of company information for personal gain.
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Ensuring the company does not trade while insolvent.
These are just some of the key responsibilities. All directors, no matter where they live, must stay updated on their legal duties to ensure compliance with Australian regulations.
Can a Non-Australian Be a Company Director?
Yes, they can.
Non-Australian citizens can become directors of private (proprietary) companies in Australia, but at least one director must ordinarily live in the country.
For public companies (those without “Pty” in their name), non-Australians can also be directors, but at least two directors must be residents of Australia.
Should My Company Appoint a Nominee Director?
For overseas companies, meeting Australia’s resident director requirement can be a challenge. To comply with this rule, many businesses choose to appoint a nominee director.
A nominee director is an Australian resident who joins the company’s board to help meet legal obligations. However, like all directors, they must follow corporate laws, fulfil directors’ duties, and comply with relevant regulations. Many businesses opt for a nominee director service in Australia to ensure seamless compliance with local laws.
Appointing a nominee director requires careful consideration. They will be closely monitored by ASIC, must always act in the company’s best interests, and ensure they fully comply with their legal duties as a director.
Therefore, nominee directors should have a strong understanding of Australian corporate laws and be well-versed in meeting their responsibilities properly.
Need a Resident Director for Your Company?
If you’re an overseas business looking to set up in Australia, we’re here to help. At Allied Business Accountant, we provide expert resident director services in Australia to ensure your company meets all legal and regulatory requirements with ease.
With a strong track record in financial, administrative, and corporate services, we act as your Australian subsidiary’s public officer, maintaining regular contact with ASIC and the Australian Tax Office.
Don’t let resident director rules hold back your growth. Contact our team today to book a free discovery call.
About the Author: David McKeller
