Asked to be temporary Director for new company: le
Printed From: AussieLegal
Category: Business, Commercial, Property, Contracts, IP
Forum Name: Franchises, Leases, Litigation, Trusts, Building, Debts
Printed Date: 26/September/2018 at 22:21
Topic: Asked to be temporary Director for new company: le
Posted By: touchifstyle
Subject: Asked to be temporary Director for new company: le
Date Posted: 21/February/2018 at 19:43
I got approached by a friend to assist with him opening an Import/export company in Australia for Airplane parts, with myself acting temporary director and due to advice he received bellow
To apply for an ABN number with the minimum of hassle I would recommend you appoint a temporary director to your company that is Australia resident that has a TFN number.
Because you are non resident and do not have a TFN number it will take about two month to get the company a ABN number.
So this is what the accountant has recommended and makes it 100% legal.
1) Appoint a friend or someone you know to be a director with the agreement that they will resign after two months leaving as sole direct.
2) When your friend or someone you know is add as a second director use their TFN number to apply for the company ABN number.
3) An indemnity letter that no trading or bank accounts to be opened until the proposed director has resigned and has been removed as director.
4) When your ABN number arrives, your friend will resign as director so he is out it.
I do have a concern here with protecting myself both legally and financially both during the period I am director and once I’ve resigned
I don’t have the knowledge to know all the legal and financial consequences
Here is a link the indemnity letter draft, I’ve removed person details https://i.imgur.com/FTvRhf6.jpg
Posted By: citizen-joe
Date Posted: 21/February/2018 at 21:10
I think your concerns are justified, as a director you would be personally liable if the company breaks any of the relevant laws. I would not touch this without personal guarantees from the other party and to ensure these were enforceable may be a step too far.
Just consider this, what if those aeroplane parts actually contain drugs???
Posted By: DoogleMcFroogle
Date Posted: 22/February/2018 at 12:00
Agree with Citizen Joe - if you are named Director, you are also responsible for any financial debt also.
Your friend does not need to be registered in Australia for tax purposes, however with no ABN, he is unable to claim back GST. ( He may be able to claim back once he has his ABN )
In the interim, he can apply for a CCID ( Customs Client Identifier ) with Border Force, and can use that on the import entries as owner of the Imported goods.
He will need advice from an Australian accountant regarding if he can charge GST when he on-sells the parts here, and if he can claim back GST.
DO NOT be a Director in this circumstance.
Posted By: AMK Law
Date Posted: 26/March/2018 at 14:13
Your above facts closely resemble the concept of a “silent director”. The above posts by the senior members of the forum correctly state that as a director you will be personally liable for any breaches. Recent development in case law and the directors' duties enshrined in the Corporations Act 2001 (Cth) make it clear that the directors are required to fulfil the duties and breach of any duty and responsibility can possibly make them personally liable.
In addition, it is both risky and wrong to conclude that a silent director does not have the same duties and responsibilities as an active director. To demonstrate this by way of an example, the Supreme Court of Western Australia held that sleeping director of the company was equally and jointly liable for breaches of the statutory duties even though the director did not actively took part in managing affairs of the company.
In short, as a director you must meet your obligations and failing to keep an active approach can possibly make you personally liable for the breaches.
Should you wish to discuss this matter further, please feel free to contact us via email on firstname.lastname@example.org, via phone on (03) 8564 8474 or visit our website at www.amklaw.com.au
This information is of a general nature only and it is not, nor is intended to be, legal advice.