Becoming a company director allows you to play an important role in the growth and operation of the business. Typically, a company may have one director or a board directors. Regardless of the number of directors a company has, all directors have duties and obligations under the law 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:

  1. A director must be at least 18 years of age; and
  2. A director must consent to taking on the role and responsibilities of a director.

Permanent Residents

An Australian permanent resident (or permanent visa holder) is the name given to a non-citizen who is the holder of a permanent visa. A valid permanent visa permits a person to remain in the country indefinitely so long as it is not cancelled. Until they apply for an Australian citizenship, they will have most of the rights and entitlements of a citizen, subject to some restrictions.

Criteria For A Permanent Person 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 permanent residents to be chosen. In contrast, public companies must have a minimum of three directors with at least two residing in Australia. Here, a permanent 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.

Key Take-Homes

  1. 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.
  2. A director must be at least 18 years of old.
  3. A person must consent to becoming a director.
  4. Permanent residents can be appointed depending on the type of company and the number of directors the company has residing in Australia.

Conclusion

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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Fiona Lu

Fiona is a Paralegal working in our content team which aims to provide free legal guides to facilitate public access to legal resources. With an interest in information, media, consumer and employment law, her primary focus is on how technology will affect the future of the legal industry.