Running a successful business may be a difficult endeavor, particularly when dealing with the complexity of corporate law, laws, and compliance. Having a resident director is a key need for every firm in Australia, and failing to achieve this requirement may have significant implications.
But what if you aren’t a citizen of the nation in which you operate?
This is when a nominated director might come in handy. A nominated director overcomes the residency issue by choosing a resident director to represent you. These services may also provide access to local knowledge, decreased administrative load, and greater reputation.
In this post, we’ll look at what a nominee director is along with the advantages of appointing a nominee director for your business in Australia.
Are you an entrepreneur looking for nominee director services in Australia? Speak with out experts from OnDemand International today.
What is a Nominee Director in Australia?
A Nominee Director in Australia is a person appointed to the board of a company to act on behalf of another individual, company, or entity, usually a shareholder. Unlike regular directors, nominee directors may not necessarily have the same decision-making powers or independence, as they are expected to represent the interests of the party that appointed them.
However, under Australian corporate law, they must still comply with the same fiduciary and statutory duties that apply to all directors under the Corporations Act 2001.
The nominee director service assures compliance with local rules and regulations by providing an essential legal presence in Australia. They are not involved in the day-to-day operation of the firm, but they do have legal duties and obligations under the Corporations Act.
They must operate in the best interests of the organization, exhibit care and diligence, and ensure that all applicable rules and regulations are followed. Failure to meet these commitments may have legal and financial ramifications for both the candidate director and the appointing party.
Who are Australian Resident Directors?
Australian resident directors are corporate directors who are tax and legal residents of Australia. According to the Corporations Act of 2001, every Australian corporation must have at least one director who is either an Australian citizen, a permanent resident of Australia, or has a special visa that permits them to serve as a company director.
An Australian resident director’s responsibility is to give strategic leadership and supervision to the business, as well as to guarantee compliance with legal and regulatory obligations and to act in the best interests of the firm and its stakeholders. They make decisions on the company’s operations, financial management, corporate governance, and risk management, and any violations of the law could result in personal accountability.
Remember that resident director does not have to be actively engaged in the company’s day-to-day activities, but they must be ready to fulfil their obligations when needed.
If a corporation is unable to satisfy the need for a resident director, it may need to hire a professional director to fill this role.
Who can be a Nominee Director in Australia?
Any natural person eligible to act as a director, able to pass KYC checks and obtain a director identification number (director ID). If the nominee is being used to satisfy the resident-director rule, they must ordinarily reside in Australia (citizenship is not required). Practically, most companies prefer someone with demonstrable governance experience and familiarity with ASIC systems, local banking practices, and Australian employment/tax basics.
The resident-director rule (s201A) explained
The Corporations Act requires:
Proprietary (Pty Ltd) companies: At least one director who ordinarily resides in Australia.
Public companies: At least three directors in total, at least two of whom ordinarily reside in Australia.
This residency requirement—not citizenship—is the usual reason foreign-owned companies appoint a nominee director in Australia.
Responsibilities of Nominee Directors in Australia
- Act with Good Faith: A director is required to act in good conscience in the interests of the business and a purposeful manner.
- Avoiding Conflicts of Interest: Directors should avoid circumstances in which their interests could clash with those of the firm. A disagreement must be declared and dealt with properly.
- Exercise Care and Diligence: Directors must utilize their powers and discharge their obligations in the same way as any reasonable person would.
- Do Not Misuse Information or Position: A director may not use their position for personal gain or that of others, or to harm the company. They must also not use the information that they obtain in their role as director to the same ends.
- Preventing Insolvent Trading: Directors must prevent the business from trading if it is insolvent.
- Complying with the Corporations Act: Includes several obligations such as making sure the company maintains proper financial records and files financial statements and reports.
- Act for the Company’s Best Interests: Although the nominee director was appointed by an individual or company, they are required to act in the interests of all the employees of the organization, not just those of their appointed person.
- Disclosure: All directors, including nominees, are required to disclose any personal material interest in a company-related matter.
Process of Appointing a Nominee Director in Australia
1. Secure Director Eligibility: Obtain a Director ID
Before any appointment is formalised, the incoming director must apply for their unique Director ID with the Australian Business Registry Services (ABRS). This is a non-negotiable legal requirement. Ensure you keep a copy of their Director ID confirmation for the corporate records.
2. Verify & Document: Conduct Due Diligence
Formalise the appointment with a due diligence pack. This should include verified identity documents (KYC), a current CV, a signed consent to act, and a full disclosure of any potential conflicts of interest. Retain this complete packet in your company’s official minute book.
3. Formalise the Appointment: Update Internal Records
Hold a board meeting to officially table and pass a resolution appointing the new director. Immediately update the company’s internal Register of Directors and prepare a current corporate structure chart. This updated chart is often a prerequisite for banking and key commercial relationships.
4. Notify the Regulator: Lodge with ASIC
Formally notify ASIC of the director appointment within the mandatory 28-day window using the online officeholder change service. Adhering to this deadline is critical to avoid late fees and maintain a clean compliance record, which is closely scrutinised by financial institutions.
5. Onboarding & protocols
Issue a letter of appointment, a reserved-matters schedule (what requires full board/owner approval), a reporting template, and your conflict-of-interest policy. Provide access to finance dashboards and prior minutes so the director can get productive quickly.
Difference between a Resident Director and a Nominee Director
Both a resident director and a nominee director are kinds of corporate directors, although their functions and responsibilities vary.
| Feature | Resident Director | Nominee Director |
|---|---|---|
| Definition | A director who resides in the country where the company is incorporated. | A director who is appointed to fulfill the statutory requirement of having a local director. |
| Purpose | To provide local expertise and knowledge to the company. | To meet the legal requirement of having a local director. |
| Role | Actively involved in the day-to-day management of the company. | Typically has a non-executive role and does not participate in daily management. |
| Authority | Has full authority to make decisions on behalf of the company. | Has limited authority and usually acts on shareholder instructions. |
| Liability | Liable for the company’s debts and obligations. | Liable for the company’s debts and obligations, but may have a limited liability agreement. |
| Residency | Must reside in the country where the company is incorporated. | Must reside in the country where the company is incorporated. |
| Citizenship | Can be a citizen of any country. | Must be a citizen of the country where the company is incorporated. |
Advantages of Appointing a Nominee Director in Australia
Here are the key advantages of appointing a nominee director in Australia:
1. Compliance with Australian Law
- By law, every Australian company must have at least one director who is a resident of Australia.
- A nominee director helps foreign companies and investors meet this legal requirement without relocating a permanent executive to Australia.
2. Local Representation
- Provides a local presence for the company, which is often required for regulatory, tax, and banking matters.
- Useful for opening bank accounts, signing local contracts, and dealing with Australian authorities.
3. Confidentiality for Beneficial Owners
- The nominee director’s name appears on the company records (e.g., ASIC register), while the true beneficial owners remain private (though still documented internally for compliance).
- Offers a level of discretion and asset protection for foreign investors.
4. Ease of Doing Business for Foreign Investors
- Removes the need for foreign directors to physically relocate or obtain residency.
- Facilitates faster company incorporation and ongoing compliance.
5. Professional Management and Compliance
- Many nominee directors are professionals (lawyers, accountants, corporate service providers) who ensure the company complies with ASIC filings, corporate governance, and tax requirements.
- Reduces the risk of penalties from non-compliance.
6. Business Continuity
- Acts as a point of contact in Australia for authorities, partners, or clients.
- Ensures the company remains functional even when foreign directors are abroad.
7. Flexibility and Control
- The nominee director usually acts under the instructions of the beneficial owner (via a private deed of indemnity or agreement).
- Owners retain effective control over decision-making, while the nominee fulfills legal obligations.
Conclusion
An Australian nominee director is appointed to represent the interests of a shareholder or organization on a company’s board. However, under Australian corporate law, it is essential to understand that their fiduciary duty lies with the company itself—not with the party that appointed them.
This means a nominee director must always act in the best interests of the company as a whole, even if those interests differ from the appointer’s expectations.
If you are considering the appointment of a nominee director in Australia, or planning to incorporate your business in the country, our experienced company formation specialists at OnDemand International can provide end-to-end guidance to ensure compliance and smooth business setup. Talk to our experts today.
FAQ’s
Yes, a non-resident can be a director in Australia.
However, there are certain conditions that must be met:
- Resident Director Requirement: While a non-resident can be a director, the company must also have at least one director who is ordinarily resident in Australia.
- Company Type: The specific requirement for resident directors may vary depending on the type of company. For example, a public company typically requires at least two resident directors.
The Australian Nominee Director costs around A$400 per month.
To be eligible for the job of business director, you must be at least 18 years old and agree to accept the role and responsibilities of a director. Before being appointed as a director, you must offer your written permission in writing.
