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Corporate Law Requirements

(Please note: this Corporate Law Requirements section has been produced by Les Lewis, Director, Lewis King Blumberg)

The Corporations Act 2001 (Cth) (“Corporations Act”) sets out the framework for the incorporation and conduct of companies in Australia, and the Australian Securities and Investment Commission (“ASIC”) is responsible for overseeing the registration and regulation of companies.

Corporations in Australia may be either ‘proprietary companies’ or ‘public companies’, and will fall within four key categories:

  • a company limited by shares;
  • a company limited by a guarantee;
  • a company with unlimited liability; and
  • a no-liability company (used only for mining-related purposes).

The most common company structure for a small to medium sized business is a proprietary limited (“PTY LTD”) company, which limits the liability of the company’s members to the amount invested and/or the amount due on unpaid shares.

COMPLIANCE FOR INCORPORATION

In order to incorporate, a company must:

  • Nominate a unique name (see below for further information).
  • Have at least one shareholder who may be a person, another company, a trust, an incorporated association or a partnership. there can be no more than 50 non-employee shareholders. no minimum share capital is required.
  • Have at least one director.

Regardless of how many directors are appointed, at least one must ordinarily be resident in Australia. Directors must:

  • be a natural person at least 18 years old;
  • provide written consent to act as a company director;
  • not be an undischarged bankrupt or subject to a personal insolvency agreement that has not been complied with; and
  • not, within the past five years, have been convicted of an offence of dishonesty such as fraud or a company law offence such as insolvent trading (a person who has been imprisoned for such an offence, must not manage a company until five years after his or her release).
  • Appoint a public officer.
  • Notify the Australian Taxation Office (“ATO”) within three months of conducting business or earning income from property in Australia (the ATO is responsible for administering taxation laws in Australia, and the public officer must ensure the company complies with these laws and liaise with the ATO regarding the company’s tax affairs).
  • Appoint a company secretary, who must be a resident of Australia. In PTY LTD companies, a company secretary is responsible for filing documents with ASIC and maintaining the corporate documents of the company. if no company secretary is appointed, these responsibilities must be discharged by the directors of the company.
  • Nominate a physical address in Australia (i.e. not a post office box) as its registered office. This will be the location used for service of legal documents or notices. Often the registered office will be the address of the company’s accountant or law firm, however, a personal residence may also be used. Written consent from the occupant of the registered office must be obtained.

The members of the company may adopt a constitution on incorporation (or any time thereafter) by passing a resolution with the support of 75% of the shareholders of the company. if a constitution is not adopted, the replaceable rules (a set of basic “default” rules) contained in the Corporations Act will generally apply.
Once registered, the company acquires a unique nine-digit Australian company number (“ACN”) which is used for identification and reporting purposes. the ACN must be displayed on any formal or public documents, cheques, and at the company’s place of business.

REGISTRATION WITH THE ATO

Companies have various reporting requirements and compliance obligations under Australian income tax legislation. We therefore recommend companies retain a qualified accountant to advise on these matters and prepare annual financial reports. companies must apply to the ATO for a tax file number (“TFN”), which is used when filing mandatory annual company tax returns. companies should also register for an Australian Business Number (“ABN”), which is an eleven-digit number comprised of two digits preceding the company’s ACN.

Companies may also need to register for goods and services tax (“GST”), pay-As-you-Go (“PAYG”) withholding tax, and other types of taxes.

COMPANY NAMES, BUSINESS NAMES, AND TRADE MARKS

A new company’s name cannot be identical to an existing company or business name. business and company name availability checks can be made using ASIC’s national register.

Companies should also check the website of IP Australia (the federal government agency responsible for administering intellectual property rights) for names or marks which may be identical or similar to the ones the company proposes to adopt. A failure to take this important step may result in the other company or business taking legal action for infringement.