How to become a company director

To become a director of an Australian company you need to consent to the role in writing. All companies must have at least one director but larger companies may have a board of directors who collectively manage the business of the company. Find out what it takes to become a company director.

Who can be a company director?

To be eligible to be a director of a company, you must be at least 18 years of age and consent to taking on the role and responsibilities of a director. You must provide your signed consent in writing before being appointed as a director and the company must keep this written consent and update ASIC whenever there are key changes to the company, including the appointment of a new director.

If the company is a proprietary company (has ‘Pty’ in its name) it must have at least one director, who must ordinarily reside in Australia. Propriety companies that engage in crowd-sourced funding must have at least two directors.

If the company is a public company (doesn’t have ‘Pty’ in its name), it must have a minimum of three directors, at least two of whom must ordinarily reside in Australia. Public companies must also have at least one secretary, and the secretary must reside in Australia.

Find out more about minimum officeholders for a company.

Who cannot be a company director

You cannot be a director if you:

  • are an undischarged bankrupt
  • have entered into a personal insolvency agreement under the Bankruptcy Act 1966 and failed to fully comply with the terms of the agreement
  • have been banned by ASIC or a court from managing corporations under the Corporations Act 2001 (the length of the banning period will be set by ASIC or the court)
  • have been convicted of dishonesty-related offences, such as fraud. (These people are automatically banned for five years from the date of their conviction or, if imprisoned, for five years from the date of their release.)

If you are already a director and you become an undischarged bankrupt or do not fully comply with a personal insolvency agreement, you will be automatically disqualified from managing corporations and cease to be a director of a company unless you have been given leave by the court to manage corporations.

What does it mean to be a company director?

Before becoming a director, you should fully understand your role and legal obligations regarding the management of the company. Don’t become a director at the insistence of others, or on the promise that you will not have to do anything.

A company is a separate legal entity – that is, it exists under the law in its own right and can do nearly all of the things that a normal person can do such as enter into contracts, borrow money, and buy and sell assets.

Because the company exists as a separate entity, almost like a separate person, you must carry out your duties as a director in accordance with certain rules. You must always act in good faith, in the best interests of the company (even where this may conflict with your personal interests) and for a proper purpose. Find out about more about company director key responsibilities.

Shareholder and board member responsibilities

Members of a company, commonly referred to as ‘shareholders’, collectively own the company. Directors must act in the best interests of the company but members are generally free to act in their own interests.

Each type of company must have at least one member and the minimum number of directors (i.e. one director for a proprietary company and at least three directors for a public company). So, proprietary companies must have at least one director and one member.

A director can also be a member of a company, which is common with small types of companies. For example, small proprietary limited companies can sometimes have only one director who is also the sole member.

A director can also operate independently from the members, which is often the case with larger types of companies. Where the director is not also a member, the director’s role is to manage or control the affairs of the company without having any ownership of the company.

Find out more about the responsibilities of company shareholders and board members.

Companies with a sole director who is also a member

A proprietary company must have at least one director who ordinarily resides in Australia. It is possible to have a single director who is also the sole member of a proprietary company.

The sole director and member of a company is responsible for managing the company’s business and may exercise all of the company’s powers. Similarly, a sole director and member of a proprietary company can appoint another director (by recording the appointment and signing the record).

Even the sole director and member of a proprietary company must keep minutes (a written record) of their resolutions concerning the management of the company. If you are the sole director and member of a company you may pass a resolution by recording and signing your decision.

Last updated: 01/05/2019 06:19