Does an Australian company need a resident director?

Yes. Under s 201A of the Corporations Act 2001 (Cth), a proprietary company (“Pty Ltd”) must have at least one director who ordinarily resides in Australia. A public company must have at least three directors, at least two of them resident.

“Ordinarily reside” turns on where a person actually lives, not citizenship. Foreign groups often appoint a local executive or professional nominee, who is a full director with full liability.

Do overseas directors need a director ID?

Yes. Every director of an Australian company must hold a director ID issued by Australian Business Registry Services (ABRS). Under s 1272C, a person must apply before the day they first become a director. Failing to hold one is a strict liability offence, with a maximum fine of 60 penalty units (currently $21,840).

Directors outside Australia cannot apply online. They must lodge a paper application with identity documents certified by a notary public or at an Australian embassy or consulate. Allow several weeks.

Do directors’ duties apply to a director living overseas?

Yes, in full. The duties of care, good faith and proper use of position and information (ss 180 to 184) apply to every director, wherever they live, as does the duty to prevent insolvent trading (s 588G).

Distance is not a defence. A director who signs whatever head office sends is exposed like any local director. See our directors’ duties and personal liability page for each duty and the protections.

What are the biggest risks for a foreign-resident director?

Director penalty notices. Each director is personally liable for the company’s unpaid PAYG withholding, GST and superannuation. The ATO must give notice and wait 21 days before suing (Taxation Administration Act 1953 (Cth), Schedule 1, s 269-25). The notice may be posted to the address ASIC holds for you (s 269-50). It is taken to be given when posted, not received (s 269-25(4)). For a director in Singapore or London, the 21 days can pass before it arrives.

Insolvent trading. If the subsidiary incurs debts while insolvent, a liquidator can recover creditors’ losses from each director personally.

Shadow and de facto directors. Under s 9AC, “director” includes anyone who acts in the position without appointment, or whose instructions the appointed directors are accustomed to follow. A parent-company executive who routinely directs the Australian board can be caught. Courts look for a pattern, not isolated pressure: Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd [2011] NSWCA 109.

Disqualification and travel. ASIC can disqualify a person for up to five years after two company failures within seven years (s 206F). A director penalty is a personal tax debt, and the ATO can stop a tax debtor leaving Australia by departure prohibition order (Taxation Administration Act 1953 (Cth), s 14S). Queensland work health and safety and environmental laws also impose personal duties on officers, wherever they live.

How should an offshore board manage its Australian subsidiary?

  • Keep ASIC records current. The company must have an Australian registered office (s 142). Notify changes to it, and to directors’ residential addresses (s 205B), within 28 days.
  • Have mail opened. Australian staff should scan ATO and ASIC mail to the board immediately.
  • Set clear delegations. Document who manages the company and how the board is informed. Delegations protect directors only if reasonable and monitored (ss 189 and 190).
  • Insurance and indemnities. Confirm D&O cover extends to Australian claims. Put deeds of access and indemnity in place, within the limits in s 199A.
  • Resign properly. A resignation takes effect on the date you ceased only if ASIC is notified within 28 days (s 203AA). Otherwise it takes effect when notified, unless ASIC (within 56 days) or a court (within 12 months) fixes an earlier date.

What should you do if a notice or claim arrives?

  1. Note the posting date. For a director penalty notice, the 21 days run from posting.
  2. Send it to an Australian lawyer immediately.
  3. Check ASIC’s record of the company and your own address.
  4. Gather current accounts, ATO balances and group funding records.
  5. If the company cannot pay its debts, take advice on safe harbour and voluntary administration or restructuring before the deadline.

How Taylor David can help

We advise foreign groups, expatriate Australians and nominee directors on Australian law and Australian-based matters only. We can:

  • advise on resident director, director ID and registered office compliance
  • review group arrangements for shadow and de facto director risk
  • respond to director penalty notices, liquidator claims and ASIC inquiries
  • draft delegations, deeds of indemnity and resignations
  • advise boards on solvency and restructuring.

This work sits within our reconstruction and turnaround and insolvency practices.