Appointing a non-Australian citizen as a company director can be a strategic move, especially for businesses looking to expand their international influence. However, Australian corporate law imposes specific requirements on company directorships, particularly concerning residency. This article explains whether a non-Australian citizen can be a company director, the legal obligations involved, and how a nominee director can help meet residency requirements.

Who Can Be a Company Director in Australia?

A company director is defined under Section 9 of the Corporations Act 2001 (Cth) as a person who has been appointed to the role, or a person who effectively acts as a director even if they have not been formally appointed. Generally, anyone can be a company director unless they are disqualified due to specific legal reasons.

Eligibility Criteria for Directors

To be a company director in Australia, an individual must:

1. Be at least 18 years old.
2. Provide written consent to their appointment.
3. Not be disqualified due to insolvency, certain criminal convictions, or a court/ASIC order (Section 206B of the Corporations Act).

Residency Requirements for Directors

The Corporations Act imposes minimum residency requirements for directors of Australian companies:

• Proprietary (Private) Companies: Must have at least one director who ordinarily resides in Australia (Section 201A of the Corporations Act).
• Public Companies: Must have at least three directors, and at least two must ordinarily reside in Australia.

This means that non-Australian citizens can be company directors, but at least one director must be an Australian resident for proprietary companies, and at least two for public companies.

What Does “Ordinarily Reside” Mean?

The term “ordinarily reside” is not strictly defined in the Corporations Act but is generally interpreted by courts based on factors such as:

• The duration and continuity of an individual’s stay in Australia.
• Where they maintain their home, employment, and personal affairs.
• Whether they have permanent accommodation in Australia.
• Whether they have strong business or family ties in Australia.

An individual can reside in more than one country, but they must demonstrate a level of permanence in Australia to be considered an “ordinarily resident.”

Using a Nominee Director to Satisfy Residency Requirements

A nominee director is a person who is legally appointed as a director of a company but acts on behalf of another party, such as a foreign business owner. This arrangement is often used by non-residents who want to establish an Australian company but do not meet the residency requirements for directorship.

Key Considerations for Using a Nominee Director

1. Legal Responsibilities: A nominee director has the same legal duties and obligations as any other director under the Corporations Act. They must act in the best interests of the company and cannot simply act as a “rubber stamp” for the appointing party.
2. Liability: If the company engages in unlawful activity (e.g., trading while insolvent), the nominee director may be personally liable, even if they were acting on behalf of a foreign owner.
3. Trust and Control: A nominee director agreement should clearly outline the scope of authority and decision-making powers, ensuring that the foreign owner retains control over business operations while complying with legal requirements.
4. ASIC Compliance: The nominee director’s details must be registered with ASIC, and they will be publicly listed as a director of the company.
5. Professional Services: Many firms offer nominee director services, where experienced professionals act as directors to help foreign businesses meet Australian residency requirements while ensuring compliance with corporate regulations.

Director Duties and Responsibilities

Regardless of nationality, all directors in Australia have significant legal duties under the Corporations Act 2001 (Cth), including:

• Acting in good faith and in the best interests of the company.
• Avoiding conflicts of interest and prioritizing the company’s success over personal gain.
• Ensuring financial responsibility, including preventing the company from trading while insolvent.
• Using company information responsibly and not misusing it for personal advantage.

Failure to meet these obligations can lead to civil penalties, personal liability, and disqualification from managing companies in Australia.

So, Can a Non-Australian Citizen Be a Company Director?

Yes. A non-Australian citizen can be a director of an Australian company. However:

• At least one director must be an Australian resident for proprietary companies.
• At least two directors must be Australian residents for public companies.
• Using a nominee director is a common solution for foreign owners who do not meet residency requirements.

Conclusion

A non-Australian citizen can legally be a director of an Australian company, provided that the company satisfies the residency requirements. For foreign entrepreneurs and businesses, engaging a nominee director can be a practical solution to meet compliance obligations while maintaining operational control. However, nominee directors carry significant legal responsibilities and should be selected carefully.

If you need assistance setting up an Australian company or appointing a nominee director, contact our firm for expert legal advice.