Help! Get out of Directorship of Company

BrewerHaHa on 14/07/2022 - 17:56
Last edited 15/07/2022 - 11:24

Hi Guys, having a bit of a moment where I'm the director of a company but I'm no longer involved and I'm looking for an out. Some background below.

So my friend started a company, a Pty Ltd and at the time it was started I was appointed director with them and assisted when/where I could. My friend is an international resident on a visa and hasn't yet obtained PR or citizenship. At the moment I am no longer able to be a part of the company due to my job and don't want to be a director of the company. Right now we can't find an Australian PR or citizen to replace me (they must ordinarily reside in Australia according to ASIC website) and I believe this is a condition to having a company. What are my options to get out?

Thanks, Mr. Brewer

Edit: For those saying wind it up, I am not a shareholder and must act in their best interest. So I cannot wind it up, especially because it's making strides right now.
Edit 2: Thanks for the responses and replies from everyone, I appreciate reading your experiences and thoughts on my situation. I'm surprised that there were not more jokes on here other than the $300k salary one. My issue isn't resolved but will keep updating as time goes on.

Education & Work

Comments

  • SF3 on 14/07/2022 - 18:04

    So my friend

    I guess, you are not friends anymore?

    • BrewerHaHa on 14/07/2022 - 18:05

      We're still friends. At the moment there's no bad blood between us at all.

      • SF3 on 14/07/2022 - 18:08
        +8

        Sounds like there is a plot twist somewhere :) wouldn’t be an OzB post otherwise.

        • BrewerHaHa on 14/07/2022 - 18:09
          +1

          Hopefully not!

    • HeWhoKnows on 15/07/2022 - 17:16
      +2

      A Director can resign at any time.
      Its not OPs problem what happens after that.
      OP isnt even a Shareholder so has no say

  • AustriaBargain on 14/07/2022 - 18:05

    https://asic.gov.au/for-business/small-business/starting-a-c…

    When's the next shareholders meeting?

    • BrewerHaHa on 14/07/2022 - 18:09

      Can meet within a week or so? It's a small company so we don't have a formalised time to meet.

    • Benoffie on 14/07/2022 - 18:17
      +4

      Make sure you complete that ASIC paperwork it's not the company's responsibility and you will be the one fined for not doing it. Also, if you resign but fail to submit to ASIC, then legally you haven't resigned in their view.

      Always with the paperwork….

      • BrewerHaHa on 14/07/2022 - 18:28

        Thanks will do!

  • Drakesy on 14/07/2022 - 18:15

    A) Abandon Ship and dissolve Company
    B) Find someone to replace you/throw under the bus possibly?

    • BrewerHaHa on 14/07/2022 - 18:18

      The company is doing quite well so A is not an option. I cannot find a person for B :S

      • SF3 on 14/07/2022 - 18:25

        Are you underpaid? Or paid? Surely if it’s a role that earns $300k you’ll find someone?

        • BrewerHaHa on 14/07/2022 - 18:28

          Definitely not a $300k role. It's doing well for where it is right now but it's not at a point where someone wants to sacrifice their job to do this.

          • SF3 on 14/07/2022 - 18:31
            +2

            @BrewerHaHa: Sound like some half way house stage…

            Perhaps like what Drakesy said, abandon ship or I reckon they should paid you more to make it worth your while - but you might not be friends anymore ( the plot twist ).

            • BrewerHaHa on 14/07/2022 - 18:49

              @SF3: I really hope that friendship > money in the eyes of my friend. The business is doing well for where it is right now but not at the point where I can put down my regular job even if they offered more.

      • Typical16-bitEnjoyer on 14/07/2022 - 18:29
        +6

        Company doing well but you want out? 🙃

        Plot thickens…

        • SF3 on 14/07/2022 - 18:33
          +1

          Obviously not good enough… inflation is hurting unless on $300k pa for some people.

        • BrewerHaHa on 14/07/2022 - 18:34
          +1

          I have a more traditional job where I work for the gain of someone else. So although I would like to stay, I have bills to pay and wouldn't be able to if I stay. I'm not someone who has enough money to sustain themselves if I took a pay cut.

          • Typical16-bitEnjoyer on 14/07/2022 - 18:43
            +1

            @BrewerHaHa: You can be a director and do jack shit, as long as you haven't provided any director/personal guarantees…

            • BrewerHaHa on 14/07/2022 - 18:47
              +1

              @Typical16-bitEnjoyer: Thanks for letting me know zeggie. I'm also slightly worried about this affecting my chances of purchasing a house. I am saving every dollar I can to buy a house to live in. I'm completely over the price of rent, the market is bananas. I have to travel around 1-1.5 hours each way to get to work right now.

            • CheapskateQueen on 14/07/2022 - 18:56
              +6

              @Typical16-bitEnjoyer: not correct. as a director, you have significant obligations and can be personally liable for company debts or actions.

              e.g https://www.ato.gov.au/Business/Engaging-a-worker/In-detail/Director-penalty-regime/#:~:text=A%20Director%20penalty%20notice%20(DPN,remission%20options%20available%20to%20you.

              if you're not part of the company, get out as fast as you can.

  • zoombie on 14/07/2022 - 18:49
    -6

    You don't need to be a PR or citizen to be running a business in Australia. Your friend can closed down the company and convert it to a sole trader. He/she can continue on as a sole trader, not sure why it was set up as a company in the first place unless it's a serious business i.e. one that expected to generate serious revenue.
    Also, director for small business don't do much at all unless this company is generating serious revenue and have a board along with executives. So if you're just fronting for your friend, I'm not sure why you can't continue, it's not like he expects you to have board meetings or set out strategies for the company.

    • Typical16-bitEnjoyer on 14/07/2022 - 18:52

      not sure why it was set up as a company in the first place unless it's a serious business

      That sweet, sweet limited liability my friend.

    • plmko on 14/07/2022 - 18:54
      +4

      This is really incorrect. Many "sole traders" are forced to contract under a company. Also you do not want to be a puppet director for someone else doing the work because all liabilities unless proven fall on you.

      • zoombie on 14/07/2022 - 19:06

        Can you give me examples of where sole traders are forced to contract as a company?
        Regarding puppet director, you're right there are risks associated with this, I misread the original post as I thought the OP was only a puppet director but he looks like he was involved in the business.

        • Typical16-bitEnjoyer on 14/07/2022 - 19:11
          +1

          A lot of creditors or suppliers won't deal with sole traders. Any Joe Bloggs can register an ABN online in a flash…or use someone elses ABN….

          • zoombie on 14/07/2022 - 19:16
            +1

            @Typical16-bitEnjoyer: No creditors or suppliers will just give you credit unless you have trade references and be in business for X amount of time. So in the beginning, you can just start as a sole trader until you build your business up and convert it to a company. It makes very little difference, imo, in the beginning.

            • Typical16-bitEnjoyer on 14/07/2022 - 19:54

              @zoombie: Many industries do, and seeing an ASIC extract confirming the director is an actual real person is generally the minimum.

        • camjl on 14/07/2022 - 23:00
          +1

          Have no idea what business this company is involved in, but in general, there was a time at least when many mining / mining services business, large construction business, other larger business would in some cases only engage with someone operating as a non-individual entity ie trust or company - usually tradie types. They try to engage you as a contractor rather than as an employee to avoid paying super, workcover, withholding and paying your taxes, payroll tax, sick/personal/annual leave and what ever other entitlements you get as an employee.
          And they can usually treat you like a piece of crap and piss you off (sack you) with out notice, reason or reconciliation/mediation.

    • BrewerHaHa on 14/07/2022 - 18:57

      As plmko said I don't want the liabilities to fall on me when I am not directly involved anymore.
      Also zeggie is right, he knows what it is.

    • AustriaBargain on 14/07/2022 - 19:08
      +2

      not sure why it was set up as a company in the first place unless it's a serious business

      Limiting liability to the company is a very good reason to. When you're a sole trader you are personally liable for all debts and legal liabilities.

      • zoombie on 14/07/2022 - 19:13

        Honestly, I thought this too until I have my own company. When you apply for a business loan, the bank still ask me to personally guarantee the loan. It makes no difference unless the company is generating serious cash. My company does over $500k in yearly revenue and the bank still does see it as enough. Hen, IMO, the company structure only makes sense once you reached, I don't know, maybe $5m in revenue or something.

        • AustriaBargain on 14/07/2022 - 19:14

          If your company ever owes a million dollars because you failed to deliver on a promise, or if an employee kills a guy, at least it's just the company that goes bankrupt and not you.

        • Typical16-bitEnjoyer on 14/07/2022 - 19:56

          Protection from ATO debt or legal proceedings from normal creditors is the main incentive. Banks nearly always get blood from the stone. They're the exception.

          • camjl on 14/07/2022 - 23:07

            @Typical16-bitEnjoyer: A director is not protected from certain ATO debts incurred by the company. You may be a 'puppet' director and completely unaware of the real 'goings on' but still be liable for these unpaid ATO debts. You may even be liable for unpaid ATO debts incurred before your time as a director in a real kick in the nuts.
            Banks only get their money first if their debts are secured, but they prefer to deal with secured loans most time anyway. Otherwise they have no more priority that you or I as an unsecured creditor.

            • Typical16-bitEnjoyer on 15/07/2022 - 10:00

              @camjl: Yes, certain specific debts, but generally for the majority, as long as you follow administration/liquidation requirements, a director is protected.

              And yes, that's what I was referring to with banks, they know how often businesses fail and obtain secured interests.

  • holdenmg on 14/07/2022 - 19:04
    +4

    Revealed: Cruel scam that uses homeless as 'dummy' company
    https://inqld.com.au/news/2020/02/14/revealed-scam-using-hom…

    • BrewerHaHa on 14/07/2022 - 19:07
      +3

      Get me out! Although I'm not in this position and wouldn't want anyone to be homeless, I'm worried about being messed over like this person.

  • bdl on 14/07/2022 - 19:04

    Elon at Twitter, is that you?!

    • BrewerHaHa on 14/07/2022 - 19:05

      Holy smokes I wish….I'm trying to just buy my first place

      • holdenmg on 14/07/2022 - 19:08

        Won't the company lend you some dough?

        • BrewerHaHa on 14/07/2022 - 19:09

          Nope :( We need every dollar!

  • thesilverstarman on 14/07/2022 - 19:17

    You have 2 options.
    1 Resign as director. If you are not the only director, then you just resign and submit paperwork to asic and to the company at it's registered address.
    2 Wind up the company. If you are the sole director and unable to have someone else take over, then you must put the company into administration to be wound up. You will need to see an accountant to do this.

    Note that if the company has traded whilst insolvent or has debts or legal lodgements that are not done, then you may be liable even after you resign. Anything that happens before the date you resign the directors may be personally liable for. If this is the case, see an accountant and a lawyer.

    • BrewerHaHa on 14/07/2022 - 19:21
      +1

      I'm not the only director, but the other director is not an AU permanent resident or citizen. I want the to chose the first option but not sure if I can because the ASIC website says that at least 1 director must ordinarily reside in Australia. Right now the company has no debts or legal lodgements that need my attention which is good. I'm aware that I may be liable after I resign. Thanks for your helpful answer

  • JaneSong on 14/07/2022 - 19:45
    +3

    Too many possibilities for unsecured hidden liabilities.

    The person who takes over as a dummy will also want to have the borrowing limits restricted and the company constitution redrafted to prevent the corporation from borrowing.

    • BrewerHaHa on 14/07/2022 - 19:54

      So what is your recommendations for me ?

      • JaneSong on 14/07/2022 - 20:29
        +1

        If you are stuck, which I think you are, then you might as well get assurances that the business won't be run in a manner that will cause you additional liabilities.

        If it's running so well at the moment, you can just stay on there; possibly draw a director's fee for the trouble too. You can use those funds to hire a solicitor to take a look at your situation half yearly or whatever makes sense.

        • BrewerHaHa on 14/07/2022 - 20:36

          Thanks, solid advice.

          • Vote for Pedro on 14/07/2022 - 21:00

            @BrewerHaHa: Bad advice. If you are the last remaining director, it’s all on you. You are the one accountable in the eyes of the law.

            As for the non resident, I’m sure they don’t care if it goes belly up. You’ll be left carrying the can

            • JaneSong on 16/07/2022 - 17:21

              @Vote for Pedro: He can't get out anyway at the moment. Figure out how to wind up the company with other hostile members.

              If it is a death trap, just milk the company more than the partner.

  • JimmyF on 14/07/2022 - 20:36

    What are my options to get out?

    Wind up the company, let your friend sort it out.

  • Vote for Pedro on 14/07/2022 - 20:58

    Resign as director or wind up company if you are the last remaining director.

    https://asic.gov.au/for-business/small-business/starting-a-c…

    • BrewerHaHa on 15/07/2022 - 08:09
      +1

      I am not a shareholder and must act in the interest of shareholders

      • Vote for Pedro on 15/07/2022 - 08:31
        +1

        And you don’t want to take any advice. Good luck to you.

        • BrewerHaHa on 15/07/2022 - 08:35
          +1

          I'm just saying that winding up the company isn't possible for me. I'd like to wind up the company but even if I tried I have no voting rights to allow that to happen. How would I go about getting past this issue?
          P.s. love the name

      • SlickMick on 15/07/2022 - 08:46
        +4

        Just to be clear, a director is entitled to resign even if you're the best think that ever happened to the company.
        You need to let go of this "must act in the interest of shareholders". You resign, you are no longer part of the business, and the remnant need to act in the best interest of shareholders. Not you problem.

        You should just discuss with your partner. You're in a position where you'd have to give up your day job to continue, which isn't realistic. Unless you payment is going to be drastically revised. It isn't your job to find your replacement.

      • JimmyF on 15/07/2022 - 10:07
        +2

        I am not a shareholder and must act in the interest of shareholders

        Then you'll be wearing all the risk of being the sole director. You can resign and it then becomes someone else's problem to deal with. The shareholders can work it out then ;)

        The fact you are the only director who has no voting rights, sounds like you're a figure head at best or a scapegoat at worst.

        • BrewerHaHa on 15/07/2022 - 11:18

          That's how I feel!

  • peterpeterpumpkin on 14/07/2022 - 21:41

    Was this for an existing eBay/AliExpress-style business in China that setup a distribution point in Australia? That used to be a popular reason for needing residents.

    • BrewerHaHa on 15/07/2022 - 08:08

      No, this is not setting up a distribution point hahaha but we are mainly working with selling goods though. The business recently took a major step and looks to be doing great, I'm really happy for my friend's success after working so much! :)

  • camjl on 14/07/2022 - 22:41

    Not that it matters much, in a way, but are you also a shareholder, or just a director?

    The company can have non-resident directors, but as you noted, at least one director needs to normally reside in Australia.
    As others have said, I'm pretty sure you don't have to do much more than just prepare an 'Intent to retire as a director declaration' (I, BrewerHaHa, notify xyz Pty Ltd of my intention to resign as a director immediately/effective xx/yy/zzzz & sign it), notify the other director(s) of your intent and lodge an ASIC form 484 to notify them of your resignation. Looks like it has to be done online now.
    https://asic.gov.au/for-business/changes-to-your-company/
    Does the other director(s) know of and agree with your desire to resign?
    Before doing this though, you can engage the services of a Nominee Director - usually a solicitor firm or similar set up for this sort of thing. It will cost money so you would want to other director's co-operation so the company pays the costs.
    They will no doubt want to investigate the company's history and activities to ensure everything is above board.
    Be aware that retiring doesn't get you out of any personal guarantees that you have given for company debts, nor does it get you out of certain unpaid ATO liabilities - search ATO director penalty notice.
    https://www.ato.gov.au/Business/Engaging-a-worker/In-detail/…

    Or just pay some homeless guy $100 to sign up as a director.

    • BrewerHaHa on 15/07/2022 - 08:06

      I am not a shareholder, just director!
      At the moment I cannot find a nominee director for this issue but is your post saying that a solicitor firm can set this whole process up? E.g. Find the nominee director for me and do the legwork?

  • MontyMacaw on 15/07/2022 - 08:02

    There are people who do this professionally. How to find them is another post.

    • BrewerHaHa on 15/07/2022 - 08:08

      Care to share something I might be able to google?

      • RMBC on 15/07/2022 - 08:43

        Accounting firms do it too, particularly for inbound subsidiaries of multinationals. Fees, depending on the company and work required often start at $10k, plus insurance for director indemnity, and go up in my experience

    • holdenmg on 15/07/2022 - 09:33

      I thought this was one of those:
      "I know a guy" situations. lol

      • BrewerHaHa on 15/07/2022 - 15:17

        If anyone knows a guy, slide into my DMs (only kinda joking)

  • sharka on 15/07/2022 - 08:58

    Can i ask, what kind of company is it?

    • BrewerHaHa on 15/07/2022 - 11:18

      We're selling a physical good, not a digital good and not a service either.

    • BrewerHaHa on 17/07/2022 - 09:52

      I was just going through some of the replies and my reply to you is very unnecessarily vague. The company is ecommerce, hope that cleats it up

  • mskeggs on 15/07/2022 - 09:47
    +3

    Is your friend in Australia? Being normally resident is not the same as having or status or citizenship. If they live here, I think they can act as a director.

    • BrewerHaHa on 15/07/2022 - 15:14

      Yes they are! Thanks for your advice, I just assumed it meant they had to be a PR or citizen. I will look into this more.

    • BrewerHaHa on 18/07/2022 - 08:22

      I've done a bit more research and think that the person does have to be a PR or citizen, so that's a bit of a bummer. I also thought that if they live here they can act as a director, but to my understanding that's not true.

      • mskeggs on 18/07/2022 - 22:03

        The requirements in the Act don't say anything about citizenship:
        http://classic.austlii.edu.au/au/legis/cth/consol_act/ca2001…

        In any case, I would appoint your friend as director, then I would resign as director.
        I truly believe ASIC will not be fussed in any way. You don't have to supply any sort of evidence (though that may be changing with the new Director Key stuff), you just declare you aren't a bankrupt and haven't been banned.

        • BrewerHaHa on 18/07/2022 - 22:04

          The director must ordinarily reside in Australia. After I looked into this further it does mean that they have to have PR or be a citizen. Living here isn't enough unfortunately :(

          • mskeggs on 18/07/2022 - 22:08

            @BrewerHaHa: I'm interested in who said that, because I suspect it is just what they have assumed is meant - the law doesn't say that, as at the link above.

            In any case, it doesn't matter.
            You can definitely appoint your non-citizen friend as a second director, nobody has ever said you can't do that.
            And then you can then definitely resign.
            The remaining Director (your friend) might possibly want to find an extra director then, or they might wait and see if they ever get a letter from ASIC. Personally, I believe nobody will ever care, and there is no process to check.

            • BrewerHaHa on 18/07/2022 - 22:13

              @mskeggs: A company must have at least 1 director who ordinarily resides in Australia is what I read from the ASIC website. So although I would like to do what you have suggested (along with a few other people in the thread) I unfortunately cannot.
              Jane Song made a post below also echoing what I have mentioned :S

              • mskeggs on 18/07/2022 - 22:21

                @BrewerHaHa: I'm not saying you are wrong, but ASIC doesn't say anything about citizenship or requiring a special type of visa, just that a director must live in Australia:
                https://asic.gov.au/for-business/registering-a-company/steps…

                If I am mistaken and your friend doesn't live here, then that would be a problem, but if they were here for 183 days last year they certainly reside here. Where else could they say they ordinarily reside?

                • BrewerHaHa on 18/07/2022 - 22:51

                  @mskeggs: A link to this (unverified) source which says that they have to be citizen or PR.
                  https://www.tetraconsultants.com/blog/complete-guide-to-resi…

                  Another link says that a foreigner can be a director of a company but cannot be the sole director which would imply that at least one has to have PR or be a citizen.
                  https://www.patricia.com.au/help-centre/company-registration…

                  What are your thoughts on this?

                  • mskeggs on 19/07/2022 - 00:36
                    +1

                    @BrewerHaHa: The first link sells a service to help internationals setup in Australia, so it is in their interest to make it seem like you must have citizenship or PR.
                    The second link says a foreign director is not ok for a single director. But I think they mean based in a foreign country, they are just being a little imprecise. It doesn't say anything about citizenship or visa status.

                    The law does not say anything about needing to be a citizen or PR. They just want to be able to take you to court if there is a problem, so just living here is enough ;-)

                    If you want to be very sure, write a paper letter to ASIC asking a single question:

                    Can a person who lives in Australia, but is not a citizen or Permanent Resident be the sole director of a Pty Ltd company?

                    They will write you a response, and you can use that letter as evidence if there is ever any trouble.

                    • BrewerHaHa on 19/07/2022 - 08:12
                      +2

                      @mskeggs: May as well, it doesn't hurt! I'm working on a solution at the moment so hopefully it won't be required.

  • BrettSh on 15/07/2022 - 09:50
    +2

    I totally agree with CheapskateQueen, you do not want to risk being personally liable for the actions of others. I own 10% of the shares in the company I work for. I got lawyers involved with the structuring to cover my arse regarding the ATO and the 2 major shareholders. I never asked the lawyers about directorship (it's a moot point), but more than one lawyer felt compelled to counsel me against ever becoming a director.

    • BrewerHaHa on 15/07/2022 - 15:16
      +1

      This is my biggest worry! Thanks for your exp Brett, I don't think I want to be a director again unless it's my own company. Maybe the day will come where I can quit my job and have my own venture but for now I'm just a cog at my current job haha

    • BrewerHaHa on 15/07/2022 - 15:13
      +1

      Hahahaha, loved the video! I was about to go on a Simpsons binge watching all the recommended clips afterward but exercised my self control for once.

      • Gunnar on 15/07/2022 - 22:38
        +1

        I had nothing of value to add so glad you got a laugh out of it. Good luck with it all though!

        • BrewerHaHa on 17/07/2022 - 09:49
          +1

          Thanks, I'm getting to work on a solution now, hopefully it all pans out

  • Slippage on 15/07/2022 - 17:19

    What’s the pay and what’s the industry? I wouldn’t mind adding to my CV….

    Jokes!

    But seriously…

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