The Resident Director Requirement Explained: What Overseas-Owned Companies Need to Know

A Pty Ltd must have at least one director who ordinarily resides in Australia. A public company needs three directors, two of them resident, plus a resident company secretary.

• “Ordinarily resides” is a question of fact about where a person actually lives. Citizenship, a visa or an investment property in Australia does not satisfy it.
• The resident director carries the same duties and liabilities as any other director, including personal liability for unpaid PAYG withholding, GST and super under the ATO’s director penalty regime.
• A nominee who acts only on the parent’s instructions puts the parent’s executives at risk of being treated as shadow directors with the same liabilities.
• Every director needs a director ID before appointment, and non-residents must apply on paper with certified documents, usually the slowest step in setting up.

The requirement exists so that Australian creditors, employees and regulators always have a director within reach of Australian courts, which means the subsidiary’s board cannot consist entirely of executives sitting in Singapore, London or San Francisco.

Point 1: What Section 201A Actually Requires

Section 201A(1) requires a proprietary company to have at least one director, and at least one who ordinarily resides in Australia. Section 201A(2) applies a stricter test to public companies: at least three directors, two of whom reside in Australia, plus under section 204A a resident company secretary. A proprietary company does not need a secretary, although if it appoints one, that person must also be a resident.

The requirement is tested at registration and continues for the life of the company. ASIC will not register a Pty Ltd whose only director lives overseas, and a company whose sole resident director moves abroad is in breach from the moment the move takes effect.

How to manage this:

• Count resident directors before you count seats. The overseas executives can fill the rest of the board.
• Notify ASIC of any director change within 28 days, and line up a replacement before a resident director relocates.
• If the entity will be a public company, plan for two resident directors and a resident secretary from the start.

Point 2: What “Ordinarily Resides” Means (and What Doesn’t Count)

The Act does not define “ordinarily resides”, and ASIC has published little formal guidance on it. Courts approach the phrase as a question of fact about where the person’s usual home is, which means the test turns on where they actually live.

An Australian citizen who has lived in Dubai for six years does not qualify. A parent-company executive who flies in for quarterly board meetings does not qualify either, and holding a visa or owning property does not change the answer. A permanent resident or temporary visa holder who genuinely lives in Australia can qualify, provided they are at least 18 and not disqualified from managing corporations.

How to manage this:

• Document the resident director’s residency (lease, utilities, tax residency) at appointment.
• Avoid appointing a relocating executive as the sole resident director until they have actually moved.
• Review residency annually as part of the compliance calendar.

Point 3: The Resident Director Carries Full Personal Liability

Whoever fills the seat owes the company the statutory duties in sections 180 to 184 of the Corporations Act. Breaching the civil penalty provisions can cost an individual the greater of 5,000 penalty units, currently $1.82 million, or three times the benefit obtained, and the criminal versions carry imprisonment. Trading while insolvent under section 588G adds personal liability for the debts incurred.

The exposure most resident directors underestimate sits with the ATO. Under the director penalty regime, each director is personally liable for the company’s unpaid PAYG withholding, net GST and superannuation guarantee charge. A new director inherits liabilities that fell due before their appointment unless the company pays them or enters administration within 30 days, and resigning inside that window does not help. None of this is reduced by calling the appointment a nominee role.

How to manage this:

• Give the resident director real visibility of payroll, BAS and super lodgements.
• Put directors’ and officers’ insurance and a deed of indemnity in place before the appointment is lodged.
• Run a 30-day tax due diligence whenever a new resident director joins an existing company.

Point 4: The Risks of Nominee Arrangements

Overseas parents often engage a professional “nominee” to hold the seat. There is nothing improper in that, and a well-run arrangement is how many foreign-owned subsidiaries meet the rule. The risks come from treating the role as a formality.

For the company, the nominee is a director with full legal powers to bind it, sign on bank accounts and lodge with ASIC, and if the provider resigns the company is in breach of section 201A immediately. A cheap nominee who never reads the accounts leaves the company without the independent judgement the law assumes a director provides.

For the parent, the danger runs the other way. Section 9 of the Act treats anyone whose instructions the directors are “accustomed to act” on as a director themselves, a so-called shadow director, so a board that simply rubber-stamps head office instructions can pull the parent’s executives into Australian directors’ duties and insolvent trading liability. Separately, section 588V makes a holding company liable where it lets an insolvent subsidiary keep incurring debts.

For the nominee, the exposure is total, which is why reputable providers insist on indemnities, insurance and information rights, and why anyone offering the role for a few hundred dollars should be treated with caution.

How to manage this:

• Use a written director services agreement covering information rights, indemnities, insurance and the exit process.
• Ensure the resident director attends board meetings and that the minutes record independent decisions.
• Keep the parent’s role at shareholder level, exercised through resolutions, and leave board decisions to the board.

Point 5: Director IDs and the Paperwork That Catches Foreign Directors Out

Every director must hold a director identification number before they are appointed. Australian residents can apply online in minutes, while non-residents without a tax file number must lodge a paper application with identity documents certified by a notary, an Australian embassy or by apostille, translated where they are not in English. That process routinely takes weeks and cannot be done on the director’s behalf.

Alongside it sit the registered office requirement (a physical Australian address, with the occupier’s written consent where the company does not occupy it), the 28-day window for notifying ASIC of changes, and the $342 annual review fee that falls due every year.

How to manage this:

• Start director ID applications for every overseas board member before any other step.
• Use a professional registered office in preference to an employee’s home address.
• Hand the compliance calendar to a corporate secretarial provider so that deadlines do not depend on one person.

What a Sound Resident Director Arrangement Looks Like

Drawing these points together, an arrangement that satisfies section 201A and protects everyone involved has three layers:

1. A genuine person in a genuine role: someone who lives in Australia, understands directors’ duties, receives the management accounts and attends board meetings with a vote they actually exercise.
2. Documentation that matches the risk: a director services agreement, a deed of access and indemnity, directors’ and officers’ insurance, and board minutes that show independent decision-making.
3. Compliance infrastructure behind the director, meaning a registered office, an ASIC and ATO calendar, and a corporate secretarial function that keeps lodgements, director IDs and residency records current.

Relocating a trusted executive works well where the move is permanent and the executive accepts the personal exposure. A senior local hire is another route, provided they understand the director penalty risk and are protected accordingly. Either way, the cost of getting the appointment right is modest beside the cost of a non-compliant company, an exposed executive, or a parent that has unwittingly become a shadow director.

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