Clarity Around Resident Directors

Acis, current as of: 16 June 2016.

It may come as a surprise that the most common question put to the team at Acis is about exactly what makes someone a resident director. 

Section 201A of the Corporations Act 2001 requires that at least one director of a proprietary company, and at least two directors of a public company, ‘ordinarily reside in Australia’.  The Corporations Act also requires that a company director inform ASIC of his/her usual residential address, meaning a company director claiming to ordinarily reside in Australia clearly needs an Australian residential address at which they usually dwell.

Whilst this seems very black and white, the resident concept is not defined anywhere in the Act, and ASIC has never issued any guidance regarding the criteria to be fulfilled for a director to satisfy this requirement. There has also been no case law that has considered the meaning of ‘ordinarily reside in Australia’ for the purposes of Section 201A. As a result, past cases that have considered the term ‘ordinarily resident’ in Australia under the Bankruptcy Act have normally been looked to for guidance as to what courts would find ‘ordinarily reside’ to mean for the Corporations Act.

These cases have stated that an individual being ‘ordinarily resident’ is a matter of fact and degree; however, relevant factors can include:

  • An examination of all of the circumstances surrounding the individual’s residency in Australia – the use of the word ‘ordinarily’ connotes a comparison or a measure of degree;
  • The permanence of the individual’s residence in Australia, as contrasted with a place where the individual stays only casually or intermittently;
  • Where the ordinary course of the individual’s life regularly occurs;
  • Whether the individual has a dwelling in Australia (although it has been held that a person can be ordinarily resident in more than one country);
  • If the individual has left Australia, and how long they intend to spend outside Australia; and
  • Employment arrangements that create a link between the individual and Australia.

The answer is not simply a matter of tax residency, but similar factors may be relevant. In the end, if it’s not immediately clear, look at the facts and come to an objective conclusion.

Don’t hesitate to contact Legal Services if you need to discuss resident directors or need any clarifications.            

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