This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case Ettiene Lawyers is an excellent option in Australia.
The incorporation and regulation of corporations is governed by:
- The Corporations Act 2001 (Commonwealth);
- the common law; and
- legislation dealing with specific issues including restrictive trade practices, consumer protection, employment practices, occupational health and safety, taxation and foreign investment.
Types of Companies
Of the common forms of trading corporations there are:
- Publicly listed corporations which are also regulated by the Australian Securities Exchange Ltd (ASX) listing rules;
- Public corporations that choose not to list on the ASX; and
- Proprietary limited corporations.
The difference between the corporations is summarized in the table below:
|Type Issue||Publicly Listed||Public Not Listed||Proprietary Corporation|
|Minimum Number of Directors||3||3||1|
|Minimum Number of Shareholders||1||1||1|
|Maximum Number of Shareholders||None||None||50|
|Minimum Number of Company Secretaries||1||1||Secretary Optional|
|Ability to raise capital from the public||Yes||Yes||No|
|Auditor||Must be appointed||Must be appointed||Optional|
|Must Comply with ASX Listing Rules||Yes (Requirement of ASX Listing Rules)||No||No|
|Independent Directors||Yes (Requirement of ASX Listing Rules)||Optional||Optional|
Liability of Shareholders
The liability of shareholders of the above types of company is limited in each instance to the amount paid or agreed to be paid on the shares allotted to the shareholder.
Companies in Australia are not required to have a minimum amount of paid-up capital.
The concept of par values for shares has been removed under the Corporations Act 2001.
Classes of shares
Shares can be issued as order, preferred or bearer shares.
Decisions reserved to the Shareholders
|Publicly Listed||Public Not Listed||Proprietary Corporation|
|Increasing Share capital||Yes||Generally Yes but depends on Constitution||Generally Yes but depends on Constitution and any Shareholders Agreement|
|Changing the Corporate purpose||No||No||No|
|Reducing share capital||Up to a point, No, but once the point is reached shareholder approval is required||Up to a point, No, but once the point is reached shareholder approval is required||Up to a point, No, but once the point is reached shareholder approval is required|
|Change of Name||Yes||Yes||Yes|
|Authority to Bind company||No||No||No|
|Authority to Bind or require directors to act in a particular manner or refrain from acting||No||No||No|
|Right to remove directors||Yes||Yes||Yes|
|Right to transfer shares to third parties||Yes||Yes||Only with approval of the board of directors and (also) usually the other shareholders|
|Change of Constitution||Yes||Yes||Yes|
Minimum number of shareholders meetings/year
Public companies must convene one shareholders meeting every year.
Proprietary companies may have shareholders meetings as and when required; there is no minimum number to be held in any year.
A Director may request convening a shareholders meeting.
Shareholders may request the board to convene a shareholders meeting and if the minimum number of shareholders so request a meeting must be convened.
Appointment of Directors: Directors are appointed by the votes of shareholders.
Powers of Directors: Generally the power of day-to-day control of the company vests in the directors. The directors’ power is absolute; save for the right of shareholders to remove directors who they think are not acting in the best interest of the company.
Minimum number of independent Directors: At least one.
Term of appointment: No statutory term, depends on the Constitution of the Companies. Shareholders have reserved powers to seek to remove directors at any time provided certain requirements under the law are met.
Requirements concerning directors’ fees: Listed Public Companies must disclose the remuneration paid to directors. Other companies do not have to disclose and generally never disclose the remuneration paid to directors.
Directors’ liability: Directors can be personally liable for the debts of companies if they allow the company to incur a debt, the company is liquidated and the court determines that the directors knew or ought reasonably to have known that the company was insolvent at the time the debt was incurred. In serious situations directors can be jailed for this offence.
Annual Accounting Procedures
The Corporations Act 2001 does not specify what documents or information if any a company must have. Directors are under a general duty to ensure that the financial accounts of the company are true and correct at all times.
Deadline for delivery of documents
Public companies must file annual returns with copies of accounts within 6 months of the end of the company’s financial year. The financial year in Australia is from 1 July each year to the following 30th June. Most listed public companies have to file and hold shareholders meetings by 31 December each year. Some companies have different financial years, as subsidiaries of foreign corporations whose year-end is different than that in Australia. Permission to have a different year-end for a company’s financial year must be give by the Australian Taxation Office.
Scope: Public companies must be audited each financial year. The Auditor must report to the shareholders and to the Australian Securities and Investment Commission if any accounting irregularities are uncovered.
Competence: Auditors must be registered. An Auditor once appointed cannot be removed by the company. An Auditor may resign but cannot be removed without the approval of shareholders and then only upon the appointment of a replacement auditor.
Other Investment Structures
Besides the use of corporations as investment vehicles overseas investors can choose from other forms of investment vehicles. Below is a table of the forms of alternate investment vehicles. The choice of investment vehicle will be dependent upon tax, control and risk return considerations.