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Legal Tip 121: Living Overseas and Company Directorships

Discussion in 'Legal Issues' started by Terry_w, 1st Apr, 2016.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Living Overseas and Company Directorships


    All Australian companies must have at least one director that is ‘ordinarily resident’ in Australia, section 201A(1) Corporations Act 2000, CORPORATIONS ACT 2001 - SECT 201A Minimum number of directors .

    Where the company does not have at least one director ordinarily resident then it would be a breach of the Corporations Act which could result in fines being imposed.

    Unfortunately the term ‘ordinarily resident’ is not defined in the Corporations Act and there are also no cases concerning this section (that I can find). Therefore the courts will interpret the phrase using it ordinary meaning. With ‘reside’ referring to the place where one ‘lives’ and ‘ordinarily’ meaning ‘normally’ or ‘usually’. So where a person, including an Australian Citizen, has moved overseas and set up a home it is unlikely they would be considered to be ordinarily resident of Australia.

    This has important implications for people living overseas and setting up trust structures in Australia to own property.
     
    TheGreenLeaf, Blacky and York like this.
  2. thesuperman

    thesuperman Well-Known Member

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    For single director companies of the trust, couldn't they just fire the company as the trustee and put themselves personally as trustees to avoid this issue? Probably not much of an asset protection issue with them living overseas.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This fixes this issue, but then the trust would be a foreign controlled trust with other different issues.

    Changing trustee is also cumbersome - titles will need to change and if there are mortgages then this have to be discharged and new loans applied for.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Changing Director and Secretary (s204A(1)) if the company has one is one way but remember that means loss of control. Often the easiest manner is to add an additional Director / Sec as Corps Act merely says at least one must be resident. There is also no law against a non-resident appointor to a trust. However if a resident Director is appointed it remains essential that the management and control of the trust is onshore. Minutes and Resolutions should address who makes the decisions and that the offshore Director ratifies the acts of the onshore Director etc.

    There can be clauses in a deed that may exist or be added that assist with ensuring that a trustee must seek authorisation for certain acts. Some call this power a guardian, others a controller etc. The trustee may need to seek written authority to vest the trust, change the deed or to do other nominated acts. eg a clause that prevents sale of trust assets without guardian authority may assist to safeguard acts of a trustee.

    All persons with companies, trusts or SMSFs should seek legal advice well prior to departing Australia other than for a holiday.