What is a resident director in Australia and why is it needed?

If you are looking to set up an Australian entity, the term “resident director” may be familiar to you. One of the first few questions for entrepreneurs planning to start a business in Australia is what is a resident director in Australia and why is it needed? If your company does not have any staff in Australia, our primary recommendation will be to consider engaging Tetra Consultants for nominee director service in Australia.

A resident director is a director who is ordinarily a resident of Australia and essentially performs the same roles and responsibilities as other directors in the company. The only difference is that the resident director needs to be appointed during the incorporation date of the company. According to the Australia Corporations Act 2001, there needs to be at least one local director appointed for each Australian entity.

Tetra Consultants provides resident director service in Australia for companies seeking to expand their business in the country. This allows businesses to set up in Australia while meeting the criterion of having at least one resident director. It is important to ensure that the nominee resident director employed has adequate experience and knowledge in both corporate governance and local tax laws. 

What is a resident director in Australia and why is it needed?

Reasons why a resident director is employed as a nominee director

While a resident director in Australia does not need to be involved in the daily operation and management of the company’s business, they are required to ensure that the company satisfies its statutory obligations such as the filing of annual tax returns. Hence, it is important that the appointed resident director is equipped with the skills needed to oversee compliance and regulatory affairs in the company.

Companies expanding their business overseas tend to employ a nominee director as their resident director, as nominee directors do not hold shares in the company and are not involved in its daily operations or decision-making process. Instead, nominee directors play a more active role in policymaking and ensuring that the company’s management complies with local rules and regulations. This allows companies to run their operations smoothly in adherence to local rules and regulations, without facing any external interference. Essentially, the executive directors will still be the ones in charge of creating and implementing business plans and overseeing the overall operation of the company.

Benefits of appointing a resident director in Australia

Although often appointed with the sole intention to satisfy the Australian regulatory requirement of having a resident director, the nominee director in Australia is usually also expected to monitor and assess the effectiveness of the controls employed to manage the company’s risk. Hence, it is favorable for the nominee resident director to be equipped with knowledge about local compliance laws and business regulations so that they can ensure that the company is adhering to the requirement set by the Australian Securities & Investments Commission (ASIC).

The resident director in Australia also plays an important role in liaising with Australian regulatory authorities and financial institutions, especially since foreign businesses that are expanding to Australia may be less familiar with local laws and policies. Furthermore, the resident director in Australia can assist in the opening of a corporate bank account for the company. However, the nominee resident director will not be given any access to the bank account without the nominator’s authorization.

Benefits of appointing a nominee director in Australia

Nominee directors in Australia are not employees of the company, hence they are often better able to provide objective and impartial advice to the managers. A nominee resident director in Australia who is equipped with relevant knowledge of the local constitution can provide more guidance to the financial management of the company. Although the appointed nominee director tends to represent the interest of the appointer, the nominee director in Australia is expected to act in the interest of the company in the event of a clash of interests.

Moreover, Australian laws dictate that nominee directors must not utilize the information which they have attained during their appointment to procure any form of advantage for their appointer. The nominee director in Australia is obliged to protect the confidentiality of sensitive company information and this obligation overruns any other duties owed to the appointer. Hence, the nominee resident director is supposed to act in the company’s best interest at all times.

Conclusion

Tetra Consultants provides nominee director and shareholder services to our international clients. Australia is one of the most popular jurisdictions that require this service. After understanding what is a resident director in Australia and why is it needed, the next step will be to engage a trusted experienced consultant to assist with Australia company incorporation. 

Tetra Consultants provides the full-service package of company formation, nominee director service, company secretary, registered address and business bank account opening. The nominee director recommended by Tetra Consultants will not play an active role in the management of the business, unless otherwise requested. Instead, the nominee director will help in the preparation of the annual report and assist in other compliance affairs. This will allow you to establish business operations in Australia without sacrificing any form of control over your company.

Contact us now for a free non-obligatory consultation to find out more about Australia nominee director services.

Prepared by: Lim Yi Xuan and Jessica Zhou