What you need to know about becoming a director | Wilson & Assoc Chartered Accountants

What you need to know about becoming a director in Australia

1. Who is eligible to be a director in Australia?


•   Age: A director must be at least 18 years old.

•   Residency: At least one director of an Australian proprietary company must ordinarily reside in Australia. For public companies, at least two directors must be residents of Australia.

•   Personal Capacity: The individual must have the mental capacity to understand their role and responsibilities.

2. What does ‘ordinarily reside in Australia’ mean?

•   Definition: The term “ordinarily reside in Australia” refers to the usual place where a person lives. This does not necessarily mean permanent residency or citizenship, but rather where the person typically resides and conducts their daily life.

•   Factors Considered: Factors that may be considered include the person’s habitual presence in Australia, their family and business ties to Australia, the length of time they have lived in Australia, and their intentions regarding residence in Australia.

•   Examples: A director who spends most of their time in Australia, has a home in Australia, and whose family lives in Australia would generally be considered to ordinarily reside in Australia.

3. Are there any restrictions on who can be a director?


•   Bankruptcy: A person who is an undischarged bankrupt is disqualified from being a director unless they have permission from the court.

•   Disqualification: Individuals who have been disqualified by the Australian Securities and Investments Commission (ASIC) or by a court from managing corporations cannot serve as directors during the period of disqualification.

•   Convictions: A person who has been convicted of certain offences, such as fraud or other crimes involving dishonesty, within the past five years, is disqualified from being a director.

4.      Can a non-Australian citizen be a director of an Australian company?

Yes, a non-Australian citizen can be a director, provided they meet the general requirements. However, the company must still ensure that at least one director (for proprietary companies) or two directors (for public companies) ordinarily reside in Australia.

5.      What is the role of the Australian Securities and Investments Commission (ASIC) in director appointments?

ASIC’s Role

Notification: Companies must notify ASIC of the appointment, resignation, or removal of directors within 28 days.

Disqualification: ASIC has the authority to disqualify individuals from managing corporations if they have breached their duties or have been involved in multiple failed companies.

6.      Are there any specific qualifications or skills required to be a director?

No specific qualifications are mandated by the Corporations Act. However, directors are expected to have a reasonable level of competence to fulfill their duties effectively. This includes understanding the company’s operations and the legal and financial responsibilities involved.

7. What is the process for appointing a new director to an Australian company?


•   Shareholder Resolution: In most cases, directors are appointed by a resolution passed at a general meeting of the shareholders.

•   Board Appointment: In some companies, the board of directors may have the authority to appoint new directors, subject to later confirmation by the shareholders.

•   ASIC Notification: The company must notify ASIC of the new director’s appointment within 28 days.

8. Can a person be a director of more than one company at the same time?

Yes, an individual can be a director of multiple companies. However, they must manage their responsibilities and avoid conflicts of interest between the companies they serve.

9. Can a director be removed from their position, and if so, how?


•   Proprietary Companies: Directors can be removed by a resolution passed by the shareholders.

•   Public Companies: Directors can be removed by an ordinary resolution at a general meeting, with special notice given as required under the Corporations Act.

10. What are the duties of a director under the Corporations Act?

Director Duties

•   Acting in Good Faith: Directors must act in the best interests of the company and for a proper purpose.

•   Care and Diligence: Directors must exercise their powers and discharge their duties with the care and diligence that a reasonable person would.

•   Avoiding Conflicts of Interest: Directors must avoid situations where their personal interests conflict with those of the company.

•   Financial Management: Directors must ensure that the company does not trade while insolvent.

11. What are the consequences of failing to comply with the director requirements under the Corporations Act?


•   Civil Penalties: Directors may face significant fines and be ordered to compensate the company for any losses incurred due to their misconduct.

•   Criminal Penalties: Serious breaches, such as fraudulent conduct, can result in criminal charges, leading to fines and imprisonment.

•   Disqualification: ASIC or the courts can disqualify directors from managing corporations for a specified period.


Becoming a director in Australia involves meeting certain legal requirements and understanding the responsibilities and duties as set out in the Corporations Act. It’s essential for potential directors to be aware of the eligibility criteria, restrictions, and the serious obligations they will undertake in this role, including the requirement for at least one director to ordinarily reside in Australia.

Source: ATO


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Disclcaimer: The information provided within this article is general information only.  None of the comments in these notes are intended to be advice, whether legal, financial product or professional. You should obtain specific advice regarding your particular circumstances from a tax or legal professional.

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