Why do you need a Resident Director when registering a company in Australia?

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Starting a business in Australia

For foreign companies looking to start a business in Australia, there are several factors that need to be taken into consideration. For example, the legal requirements are often different from those in other countries, so understanding the complexities of registering a company in Australia is important, before trading begins.

Foreign companies have different options available when entering the Australian market and starting a business in Australia. These include setting up a subsidiary company in Australia or registering the Australian entity as a branch. It could also mean working with an Employer of Record to outsource all employer responsibilities and liabilities, which saves companies having to set up a formal entity in Australia.
Related: Subsidiary or Branch: Choose the right business structure when setting up in Australia

The most frequent way of starting a business in Australia for foreign companies, is to set up a Local Legal Entity (a subsidiary) and to do that, it is a legal requirement under the Australian Corporations Act 2001 to have local representation on the board of directors (a Resident Director). A private proprietary limited company (Pty Ltd) must have at least one director who ordinarily resides in Australia and a public company must have a minimum of three directors, of which two must be Australian residents. These requirements were set up by The Australian Securities and Investment Commission (ASIC) who won’t allow a company to be registered or controlled solely by foreign residents.



Who can be a Resident Director?

Once a company decides to set up a Local Legal Entity (subsidiary) in Australia, one of the first tasks is to fill the role of Resident Director. The eligibility requirements for the role of Resident Director are for the person to have ordinary residency in Australia, be a permanent resident of Australia or hold Australian citizenship. They must be 18 years old or above and they must consent in writing to take on the role and responsibilities of a company director.



Can an Australian employee of the company be appointed as a Resident Director?

It is permissible for a foreign business to appoint an employee, who is an Australian resident or citizen, to the role of Resident Director of their Australian subsidiary company. While on the surface, this is an easy solution for many companies, it is rarely the best decision, as the role places obligations and responsibilities on the employee, as well as some risks and ongoing commitments. It is also very important that the member of staff is suitably qualified for the role and that they fully understand the personal risks and responsibilities the role involves, as well as being reliable, trustworthy, and committed to staying in the role long term. Appointing the right person is crucial for the successful ongoing running of the business, as well during incorporation and the initial start-up period.



What are the risks involved?

Resident Directors have the same responsibilities and legal obligations as any Australian company director, so it is important that they are experienced in meeting corporate governance and business registration requirements, as well as ensuring that the company is compliant with the Australian Corporations Act 2021, at all times.

If an employee Resident Director resigns, leaves the business, or decides they no longer want the responsibility of the role, there is a risk to business continuity. Employees often leave organisations at short notice, and this can result in time consuming and costly restructures and reorganisations of resources or hasty external recruitment.

Resident Directors have access to company records and levels of authorisation that an employees would not have under normal circumstances if they weren’t a company director. This can lead to company information or authorisations being compromised or conflicts of interest arising.



Australian Resident Director Services – an alternative solution?

By appointing a specialist Resident Director service provider, foreign companies can concentrate on launching their Australian subsidiary business and not have to worry about incorporation, compliance, continuity, and the everyday operations. The Resident Director plays a key role in getting the business up and running in Australia by ensuring all legal and regulatory requirements are met. Once the business is set up, companies can choose how much involvement they want and need from their Resident Director, depending on their needs, resources, and corporate ambitions. The great advantage of using a specialist Resident Director service, is that companies are guaranteed continuity of service, excellent advice in all areas of compliance, legal and governance as well as accounting and business resources whenever needed.



Why Azure Group as your Resident Director

Not all Resident Directors are the same! Azure Group has significant experience managing the needs of international businesses as a specialist in bringing foreign companies to Australia and helping them be successful in the local market.

Azure Group understand the challenges and complexities of establishing a subsidiary business in Australia and how important it is for companies to be able to concentrate on doing what they do best, while Azure Group deal with incorporation, compliance, set up and continuity planning. Azure Group Resident Directors all have significant Australian and international business experience, are hugely experienced accounting and compliance professionals and will add credibility to any company through their directorship. Azure Group have acted in the capacity of Resident Director for Australian subsidiaries of overseas entities whose global origins include the United States, United Kingdom, Europe, China, Singapore, UAE, and New Zealand, to name but a few.

Azure Group can offer any foreign business a full Resident Director service in Australia, but that is just the start of the business journey Azure Group offers overseas companies. To find out more Get in Touch >

DOWNLOAD OUR GUIDE TO SETTING UP IN AUSTRALIA

Related: Starting a Business in Australia Checklist - before, during and after!

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Azure Group
Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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