When setting up a proprietary company in Australia, the resident director plays a significant role in the strength of a business and comes with responsibilities imperative to supporting and ensuring compliance of an Australian business.
Through our work helping global businesses set up in Australia, we have found there are several misconceptions people have about the role of the Australian resident director.
Clearing these misconceptions can help you make an informed decision as to the right person to appoint, so your business can meet its compliance obligations.
Let’s recap on what is an Australian Resident Director.
What is an Australian Resident Director?
- What is an Australian Resident Director?
- Misconception No. 1: The managing director automatically becomes the Australian Resident Director
- Misconception No. 2: The Australian resident director runs the company
- Misconception No. 3: You need a company secretary as well as an Australian Resident director.
- Finding the best person for the job as Australian resident director.
One of the requirements stipulated by ASIC when setting up a company in Australia is that all private companies registered in Australia must have a local Australian resident appointed as a director of the company at all times.
To be eligible to be a director of a company, you must:
- be at least 18 years of age
- ordinarily, reside in Australia
- consent to taking on the role and responsibilities of a director.
A proprietary company (Pty) must have at least one director.
A public company must have a minimum of three directors, with at least two of whom must ordinarily reside in Australia.
The responsibilities of being an Australian resident director include:
- Liaising with regulatory authorities and financial institutions
- Managing your annual compliance obligations, such as ASIC registrations and changes, and all ATO tax compliances.
More details can be found on our services page about Australian Resident Director.
However, there seems to be several misunderstandings surrounding the appointment of an Australian resident director. Let’s clear them up, so you can make an informed decision when appointing the resident director.
Misconception No. 1: The managing director automatically becomes the Australian Resident Director
Often, we get asked if we can appoint the managing director as the Australian resident director. The answer is yes, as long as they meet the criteria set out under ASIC law.
Nevertheless, the managing director of your new Australian entity does not automatically have to be appointed the Australian resident director.
We advise that the appointed resident director has compliance and Australia tax law experience. This person also has the time to adhere to the role of Australian Resident director. If your managing director does not have the skills nor the time to comply with his/her role as resident director, you can appoint someone else.
As well as the responsibilities of a director – to act in the best interests of the company, with care and diligence, to avoid conflicts of business and personal interests, and avoid trading while being insolvent – there are other responsibilities that are imposed on the company that the resident director is responsible for. These include;
- having a current registered office– A company must have a current registered office in Australia and must inform ASIC of its location.
- having a principal place of business– A company that operates a business from a location different from the registered office must inform ASIC.
- disclosing personal details of directors– A company must inform ASIC of the name, date of birth and current residential address of directors.
- keeping financial records– A company must keep up-to-date financial records that correctly record and explain transactions and financial position. Larger companies have additional obligations to lodge financial reports with ASIC.
- notifying ASIC of key changes– Whenever there are certain key changes to the company’s details (e.g. registered office, principal place of business, directors), ASIC must be notified.
- paying relevant fees to ASIC– For example, the annual review fee.
- checking annual statements– A company’s details on the ASIC register must be accurate and up-to-date.
Misconception No. 2: The Australian resident director runs the company
An Australian resident director can be appointed in name only. The resident director does not have to be given any day to day business responsibilities in operating and managing the business.
For example, you can appoint a nominee director, such as Penguin Management offers as part of their Australian resident director services, as a resident director. This accredited nominee will act as the resident director for your Australian proprietary company.
The Australian resident director will not have any day to day business responsibilities. Their role is to liaise with regulatory authorities and financial institutions and manage your company’s compliance obligations.
Misconception No. 3: You need a company secretary as well as an Australian Resident director.
Many people believe that an Australian proprietary company needs both an Australian resident director and a company secretary. This is not true.
An Australian proprietary company must have at least one director who is resident in Australia. When a company appoints an Australian resident director they have the choice of whether to appoint a company secretary or not. The company secretary must reside in Australia.
If your company does not appoint a company secretary, the role and responsibility of the company secretary must be assigned to another person. It most cases these tasks are undertaken by the resident director.
The role of the company secretary in Australia includes administering and monitoring the affairs of the company with a focus on governance and transparency. These are mandated within the Corporations Act 2001.
Duties include maintaining a registered office with ASIC, prepare for and minutes of board and management meetings ensuring ASX and NSZ Listing rules if applicable, NSX regulatory bodies compliance and monitor compliance of government responsibilities and obligations with regulatory bodies such as ATO, ASIC, and any other applicable regulatory bodies.
Finding the best person for the job as Australian resident director.
With over 20 years’ experience in helping business set up in Australia, Penguin Management can help you find the right Australian resident director for your business.
Together, by talking through the role and responsibilities, you can be confident you have made the right choice.
Call us on +61 2 8298 5301 or complete the form and we’ll get in touch.
Further reading suggestions
As well as an Australian resident Director, a new company must appoint a public officer. In this article, we explain the role of a public officer and their legal duties and responsibilities in an Australian company.
If your company is looking to set up in Australia, here are some answers to some common questions in our Doing Business in Australia FAQ guide.