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Can a Non-Citizen or Permanent Resident Be Company Director in Australia?

Are you planning to establish a business in Australia?

Need to operate your company as the director?

If you want to operate a company in Australia as a director, it is vital to be aware of the legal guidelines regarding company directors’ eligibility criteria. A director is the head of the company and, therefore, must comply with the law. This is especially relevant for non-citizens and permanent residents in Australia. Here’s all you need to know about the Australian government’s rules for company directors.

What Is Directorship?

Directorship, in simple words, is the position assigned to the company director. The company’s shareholders appoint a director. His or her primary job is to run the business and make managerial decisions.

If you want to be the director of your company, remember that the position entails crucial responsibilities. For instance, a director owes special fiduciary duties to the business. These duties require you to take actions that are in the best interest of the company and its shareholders and employees. The director has to think for the good and welfare of the entire team and the progress of the business simultaneously. This leaves little to no room for biased approaches and self-interests.

Given the vital role a company director plays in the business’s success and survival, it is critically important to understand the laws governing company management in Australia. Any violation in this regard will make your position vulnerable. Breaching your fiduciary duties will make you legally responsible for accruing debts, and serious breaches may impose criminal charges.

Corporations Act 2001

Directorship related regulations are set out under the Corporations Act 2001, to protect the director, the business/company, and its shareholders. The act creates certainty regarding who can and cannot become a company director in Australia. Here we will discuss the circumstances where a non-citizen or permanent member can become a board director under this act.

Who can be a Company Director in Australia?

Individuals above 18-years of age are legally allowed to hold the position of a director. However, apart from the candidate’s age and willingness, specific rules determine who can be the director. The laws vary according to your company’s status, that is, whether it is public or private.

Private Companies (Proprietary Limited or Pty Ltd) 

Private firms need to comply with the resident director rule. A private firm can only have one director, and that director must be a resident of Australia. If more than one director is appointed, most of them must be Australian residents.

Public Companies (Unlisted/Listed)

Public firms must have at least three directors, along with a company secretary. A minimum of two directors must reside in Australia.

Can Permanent Residents Become Directors?

Individuals that hold a valid visa that allows them to live in Australia indefinitely are called Permanent Residents. Permanent residents are considered by law as ordinarily residents in Australia, and they are eligible to become a resident director.

If you are a permanent resident, you legally qualify to hold the position of directorship and become the company’s sole director. 

Can Non-Citizens Become Directors?

Non-citizens meet certain requirements to become a company director. In Australia, a non-citizen is an individual who doesn’t possess Australian citizenship or a valid Australian passport. In the absence of a passport and citizenship, a non-citizen cannot be appointed as resident director. Therefore, it isn’t possible to form a company with only one non-citizen director, and at least one resident director should be on board to appoint them as a director.

Shareholders’ Requirements

Whether you are a permanent resident or a non-citizen, you are entitled to purchase shares in any Australian company. Shareholders aren’t subject to as strict rules and regulations as company directors are. The Corporations Act doesn’t prohibit any foreign entity or individual from purchasing shares in an Australian firm.

However, you must be aware of the probable tax implications of purchasing shares in a company. These differ according to the residency status that you enjoy in Australia. That is, for permanent residents, the tax implications will vary from non-citizens. Hence, you must understand the laws governing foreign-owned assets in the country of your residence as well as Australia before investing in shares.

Key Points

Directorship brings a lot of responsibilities for the individual appointed as a company director. It is a demanding and critically important role that is subject to salient legal formalities and rules. Permanent residents and non-citizens in Australia must understand and meet the legal requirements before agreeing to become directors or shareholders. Any violation, whether intentional or unintentional, can lead to legal penalties. To get up-to-date information about company director requirements, get in touch with Smarter Advisory & Accounting at Burwood so you can make the right choice. 

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