Registering a Company:
Registering a Company Name:
When registering a company, you must select a company name that you have chosen for your company, reserved under the Australian Security and Investment Commission (‘ASIC’), or use your Australian Company Number (‘ACN’) once it has been provided. ACNs are nine-digit numbers that are used to uniquely identify companies. When selecting a company name, you must choose one that is not already registered to another business or company. The ASIC name availability search allows you to see if a name is available.
Operation of Your Company:
You will have to make decisions on the company’s governance before registering. A constitution, replaceable regulations, or a mix of the two may be used to achieve this. Replaceable rules are a fundamental, unwritten set of guidelines for running a company. These policies can be readily amended if the law changes or the company’s values change. A company’s written constitution, which should be kept with its records, outlines the regulations that apply to the business.
Additionally, you need to choose your company’s share structure, which can be restricted by shares, unlimited with share capital, limited by guarantee, or liability-free. These structures will be discussed below.
Understanding obligations:
Officeholders must apply for a director’s identity number and are responsible for ensuring that the company conforms with the Corporations Act 2001 (Cth). In addition, they must also keep company records up to date, pay the applicable annual review and lodging fees, and keep the company’s information updated on the register.
Additionally, for their positions in the company, directors, secretaries, and members must provide written consent to the corporation. The corporation must have a minimum of one member, and the director and secretary must be older than eighteen. At least one of the directors of your proprietary company needs to be a resident of Australia. On the other hand, if the business is publicly traded, at least two of its directors must typically reside in Australia.
Both proprietary and publicly traded companies are required to have a registered office address. If this office address for a proprietary company does not belong to the company, for example, an accountant’s office, then you must obtain written authorisation before using such.
Registering the company:
The Australian Government’s Business Registration Services (‘BRS’) allows you to register your company, and combine businesses and tax registration into one place, making it easier to start your business.
However, there are exemptions for those companies that are unable to register online. This includes companies that:
- Have unlimited liability;
- Have an individual share value of more than four decimal places;
- Are registering as a CCIV;
- Require lodgement of the following forms:
- 207Z Certification of compliance with stamp duty law;
- 208 Notification of details of shares issued other than for cash; or
- 379 Request to suppress residential address or change residential and/ or alternative address.
- Is a publicly traded company with an ACN as the company name and is governed by a company constitution;
- A company officeholder’s place of birth causes an error;
- Have a company address is not accepted by ASIC; and
- Have an applicant that is facing other extenuating circumstances.
If any of the following criteria are applicable in your situation, you may need to send an online enquiry to ASIC which includes the following details; the proposed company name and type, the exception applicable to your registration, a transaction reference number (if applicable), and any error messages if received.
A private service provider (or “PSP”), such as an accountant, lawyer, or other firm, may also be used to establish a company; however, doing so is typically more expensive than going through ASIC directly. Following application processing, you will receive an ACN, corporate key, company registration, and a certificate of registration.
Types of Companies Under the Corporations Act 2001 (Cth):
Proprietary Companies:
A proprietary company is a limited liability entity which is indicated by the acronym “Pty Ltd” and have less than fifty shareholders and fifty non-shareholder employees. Being a private company with limited liability, the designation “Pty Ltd” helps the company stand out from other forms of company structures.
Section 112 of the Corporations Act 2001 (Cth) defines two categories of proprietary companies: limited by shares, and limitless by share capital. If a shareholder’s obligation is unlimited by share capital, it does not stop at the amount of money owed on their shares. Shareholders may be able to provide further money to pay off the company’s debts after making their initial investment in the case of insolvency or other financial difficulties.
Restricting an individual’s liability to the amount they have invested in the company is known as limited by shares. this structure offers some security for the personal assets of owners if the company experiences financial difficulties or becomes insolvent.
Public Companies:
A public company is a larger form company than a proprietary company and can raise funds from the general public by freely issuing shares on the Australian Stock Exchange (‘ASX’). Public companies are limited liability and use the acronym “Ltd”. companies which means the public ascertains a certain amount of ownership. A public company, as opposed to a private one, is required to have a minimum of three directors, file yearly accounts with ASIC, and have an unlimited number of shareholders.
Not every publicly traded company is allowed to exchange its shares in an open market. Public unlisted companies are those that are not required to disclose their shares on the ASX and have more than fifty shareholders who are not employees.
There are four types of public companies; limited by shares, limited by guarantee, unlimited with share capital, and no liability company. Limited by shares has the same definition for a public and a private company, meaning an individual’s liability is not limited beyond their investment in the company.
Non-profit organisation and charities are a type of public company which is limited by guarantees. This means they have no shareholders or share capital in the traditional sense. Members in this structure have limited liability and can concentrate on their social or charitable goals rather than the distribution of profits. Members of the corporation typically make a small payout in the case that the business fails, and their liability will be limited by this sum, which is specified in the constitution of the company.
Unlimited share capital indicates that there is no limit on the personal liability of the shareholders. Limited by shares means that an individual’s liability is capped at the amount they have invested in the company.
No liability companies are companies that have a share capital, sole objects are mining purposes, and the company has no contractual right to reclaim calls on their shares from a non-compliant shareholder. Because of the financial risks associated with mining, the government policy exempts unpaid shares from liability for pay calls.
Advantages and disadvantages of proprietary and public companies.
| Advantages | Disadvantages | |
| Proprietary company | Simplified regulatory and reporting requirements; There are fewer disclosure obligations. There is no requirement for things such as holding general meetings or publishing financial reports;Limited liability; and There is more flexibility in their operations such as structuring and goals as there are no external interferences. | Limitations on fundraising through public offers of shares or debentures;Proprietary companies are not exempt from a tax-free threshold no matter the amount they earn; and It may be challenging to raise capital as there is a reliance on private investors, loans, and personal funds. |
| Public Company | Ability to raise capital as it is open to investment;Maximise the ability to grow the company; and Public companies offer stock options, restricted stock units, and other equity-based incentives that can attract and retain a wide range of employees. | Prominent levels of regulations and compliance come with public companies due to investors and general public protection; and Elevated levels of reporting. The company must prepare a director’s and financial report following the Corporations Act. |
Difference Between a Proprietary Company and a Public Company:
| Proprietary: | Public: | |
| Executive and shareholder limits: | A proprietary company can have up to fifty non-employee shareholders, although at least one is required. A minimum of one director is required, along with a registered office that can choose to be open to the public but is not required to. | Three directors are required, two of whom must ordinarily reside in Australia. A company secretary and a registered office that is accessible to the public during certain hours are also required. |
| Ability to raise capital: | Fundraising initiatives that need a prospectus cannot be conducted. Only current shareholders or employees may transfer shares, and directors usually support fundraising efforts or get credit through financial instructions. For any reason, the directors may also decline to record a transfer of company shares. | The public can be issued shares to raise capital. The Corporations Act 2001 (Cth) stipulates that when a corporation is raising money, it must disclose several things to investors. |
| Disclosure requirements: | Unless exempt, a corporation is required to file its annual director’s report, audited accounts, and financial statements with ASIC. | Financial statements, director reports, and audited accounts must all be made public by a corporation. The constitution of the company and these reports must be given to the shareholders. Additionally, a yearly general meeting is required, to be called with 28 days’ notice given to shareholders. |
| Liability: | Either limited by shares or by unlimited share capital. If their liability is restricted by shares, it is limited to the face value of their shares; if their liability is unlimited by share capital, it is unlimited. | Liability for public corporations varies depending on the company’s structure. They are only accountable for the face value of their shares if they are limited by shares. Limited by guarantee means that, if the company is wound up, their contribution is restricted to a certain amount. A limitless share capital implies unrestricted liability for shareholders. Only mining businesses that fulfil specific requirements are covered by no-liability companies. |
Registering an Indigenous Corporation:
The Corporations Aboriginal and Torres Strait Islander Act 2006 allows Aboriginal and Torres Strait Islander groups to form indigenous corporations and can be registered with the Office of the Registrar of Indigenous Corporations (ORIC).
Setting up Shares Register:
A company that issues shares is required to maintain a record of every share that is issued. This document is referred to as the “share register” or the “register of members.” This register includes all pertinent data on the business’s members, including any updates to a member’s holdings or personal information, and details about the shares held by the firm.
What are Dividends?
One way that a business gives its shareholders their earnings is through dividends. Dividend payments are permitted for both proprietary and public businesses; however, there is no legal obligation to do so. The board of directors of the company decides how much to pay, and it is often done quarterly or annually. If a dividend-paying company’s common shareholders own the shares before the ex-dividend date, they are entitled to a distribution. Three primary categories of dividends exist, namely:
- Final dividend payments are paid at the end of the fiscal year, usually following a company’s annual general meeting when the company’s financial success is disclosed;
- Interim dividend payments which are paid quarterly or halfway through the fiscal year; and
- Special dividends are paid on special occasions, such as a dramatic increase in profits over a given period.
The Paying of Dividends:
Companies have the option to reinvest dividend income back into the business rather than having to pay it out. The director alone, nevertheless, has the final say in this matter. Under section 254T of the Corporations Act 2001 (Cth), a dividend cannot be paid out in the following situations:
- When the company’s assets exceed its liabilities immediately before the dividend is declared;
- The payment of the dividend is not fair and reasonable to the company’s shareholders as a whole; and
- The payment of the dividend materialistically prejudices the company’s ability to pay its creditors.
Dividend Rights:
Different dividend rights apply to distinct types of companies. Unless the entity has a constitution that specifies otherwise, or unless the company has passed a special resolution granting distinct dividend rights, each share in a publicly traded corporation has the same dividend rights. Dividend rights for a proprietary business are governed by the conditions of the shares that are issued, and the director is free to distribute dividends in any way they see suitable. In the case of no-liability companies, if a call has been placed on a share and is past due and underpaid, the shareholder is not entitled to a dividend on that share.
Dividends from Proprietary Companies:
The directors of the corporation determine whether to issue dividends. The directors are solely responsible for making this choice; shareholders have no say in the matter. Dividends can be paid in several ways, but the two most popular ones are cash and stock dividends. While stock dividends are given to investors in the form of additional business equity, cash dividends are paid straight into the designated accounts of the investors. These dividends are distributed in cases where the business has kept profit and do not affect its capacity to settle debts with creditors.
