Becoming a company director allows you to have great influence over the growth and operation of the business. Typically, a company may have one director or a board directors. But with great power comes great responsibility. At law, all directors have duties and obligations that hold them responsible for managing the company’s affairs. Before you understand the legal consequences of failing to adhere to these rules and regulations, you must firstly familiarise yourself with the qualifications a person must have in order to be appointed as company director.
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What Is A Company Director?
The definition of a ‘company’ can be found in the principal legislation regulating companies in Australia, the Corporations Act 2001 (Cth). Section 9 of this Act defines a company director as ‘a person who is appointed to the position of director’.
Who Can Be A Director?
Generally, there are no specific qualifications a person must have to be appointed as a director of a company, regardless if it is public or proprietary. However, there are two legal requirements relevant to the appointment of company directors:
- A director must be at least 18 years of age; and
- A director must consent to taking on the role and responsibilities of a director.
In contrast, non-Australian residents (otherwise known as foreign residents) do not hold a permanent visa (such as a student visa) nor an Australian citizenship.
Criteria For A Permanent Person or Non-Resident Being Appointed As A Director
The number of directors a company can have depends on whether it is a proprietary company (has ‘Pty’ in its name) or a public company (does not have ‘Pty’ in its name). For proprietary companies, they must have at least one director residing in Australia. If later it is decided more directors should be appointed, then it is possible for non-Australian residents to be chosen. In contrast, public companies must have a minimum of three directors with at least two residing in Australia. Here, a non-Australian resident can also be one of the three who is eligible to be a company director.
Ultimately, if a foreign person is appointed as a director, they must establish ‘ordinary residence’, in other words, Australian residency. For a person to be appointed as a director, he or she must be personally present or ordinarily resident in Australia. ‘Ordinary residence’ has been interpreted to mean Australia being the settled place of abode where a person regularly lives. So a person must a dwelling in Australia, and cannot stay there casually or intermittently. In fact, there has to be a degree of permanence of the person’s residence. Therefore, in some circumstances, a company may appoint one or several foreign directors depending on the type of company and if they meet the above requirements.
Be aware some people may have dual residency that authorises them to have ordinary residence in more than one country at the same time.
- Not just anyone can be a director. There are types of people who are deemed not eligible to be a director of a company. For a comprehensive list, check out Australian Securities and Investments Commission’s Who Can Be A Director.
- A director must be at least 18 years of old.
- A person must consent to becoming a director.
- Non-Australian residents can be appointed depending on the type of company and the number of directors the company has residing in Australia.
Before a person is appointed as a company director, it is important a decision is made after considering the rules and regulations. Otherwise, legal problems can arise, which can negatively affect the company.
Are you unsure of your obligations as a company director? LawPath can connect you with an experienced business lawyer.
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