Key Concepts, Company Registration

PART B: CORPORATIONS LAW
Week 7: Key Concepts, Company Registration
Lecture Notes
Topics for week 7
Weekly textbook reading: Business and Corporations Law (BCL) chapter 8
The topics to be covered in this class are:
● What are the key concepts associated with Corporations Law?
● Characteristics of a company
● The effects of registration of a company
● The process of registering a company in Australia
Key Concepts in Corporations Law
There are a number of key concepts which must be understood when studying the law of
corporations. These include:
● A company
● A Corporation
● A company as a “separate legal entity”
● Limited liability
● The corporate veil
● Public company
● Proprietary company
The study of company law involves the study of legislation (Corporations Act 2001 (Cth) and
interpretations of that legislation by the courts (“case law”), as well as the company’s
constitution which provides the rules for its internal management. The Corporations Act
applies across Australia and is administered by the Australian Security and Investments
Commission (ASIC) (and some other government bodies).
The main functions of ASIC include:
● Registering companies
● Registering auditors and liquidators
● Granting Australian financial services licences
● Keeping accessible registers of information about companies and financial services
licencees
● Investigating suspected breaches of Corporations law
● Advising the Commonwealth Treasurer of changes required to overcome problems
with company legislation
Page 1 of 19A company is an artificial entity recognised by the law as a ‘legal person’ with its own rights
and liabilities. A company is separate from its owners (shareholders/members) and its
managers (directors and officers).
The Corporations Act 2001 defines a company as “a company registered under this Act”.
As there are different types of companies, the Corporations Act also supplies definitions of
two important types of company:
company limited by guarantee means a company formed on the principle of having the
liability of its members limited to the respective amounts that the members undertake to
contribute to the property of the company if it is wound up.
company limited by shares means a company formed on the principle of having the
liability of its members limited to the amount (if any) unpaid on the shares respectively
held by them.
The terms “company” and “corporation” are generally used to mean the same thing.
The status of a company as a “separate legal entity”, having its own legal personality, is
the core legal characteristic of a company and this distinguishes it from other kinds of
business structures, which we looked at in week 6. Directors and members of a company
may change over time, but the company continues to exist as a legal person and can
conduct business just like a human being.
Limited liability is another key feature of most companies and one of the things that makes
them an attractive form of business structure. Limited liability has the effect that
shareholders will not be personally liable for the debts of the company (in contrast to the
position of sole traders and partnerships). The liability of shareholders is limited to the issue
price of any shares they own.
Companies come into existence upon registration. In Australia, this requires the filing of an
application for registration with the Australian Securities and Investment Commission (ASIC)
together with the relevant fee.
Every company will have members and managers. The members are in most cases the
shareholders and the managers of the company are the directors who make up the Board.
A company must be either a public company or a proprietary company. Most proprietary
companies are small. Public companies are large and can raise capital from the public.
They generally run large business and have many shareholders. Some large companies list
their shares on the Australian Securities Exchange (ASX).
Characteristics of a company
Chapter 2B of the Corporations Act 2001 (Cth) sets out the basic features of a
company
As already outlined above, a company is an abstract legal person with rights and separate
from its members. A company comes into existence at the beginning of the day on which it
is registered with the name in its certificate of registration (s 119 Corporations Act).
Page 2 of 19The legal position and powers of companies come into existence on registration as a
separate legal entity. These powers are outlined in s 124 Corporations Act1, and include the
power to:
● Issue and cancel shares2
● Issue debentures3
● Grant options
● Distribute the company’s property among its members
● Arrange for the company to be registered or recognised as a body corporate
overseas
● Do anything it is lawfully authorised to do.
Because it is a separate legal entity, a company can sue and be sued in its own name, it
owns its own property (ie a company’s property does not belong to the shareholders), and
it continues to exist until it is deregistered by ASIC (S 601AD(1) Corporations Act) . A
company can enter a contract where an individual has the express or implied authority to
act on behalf of the company (s 126 Corporations Act).
Limited liability
3 A debenture is a medium-term investment issued by a company where investors lend them money
in exchange for a regular and fixed interest amount for the term of the investment. The invested funds
(principal) are repaid at the end of the term (maturity) and are usually secured by tangible property.
2 A share represents a portion of ownership interest in a corporation, represented by a stock certificate
stating the number of shares of an issue of the corporation’s stock.
1
124 Legal capacity and powers of a company
(1) A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company
also has all the powers of a body corporate, including the power to:
(a) issue and cancel shares in the company;
(b) issue debentures (despite any rule of law or equity to the contrary, this power includes a power to issue
debentures that are irredeemable, redeemable only if a contingency, however remote, occurs, or
redeemable only at the end of a period, however long);
(c) grant options over unissued shares in the company;
(d) distribute any of the company’s property among the members, in kind or otherwise;
(e) grant a security interest in uncalled capital;
(f) grant a circulating security interest over the company’s property;
(g) arrange for the company to be registered or recognised as a body corporate in any place outside this
jurisdiction;
(h) do anything that it is authorised to do by any other law (including a law of a foreign country).
A company limited by guarantee does not have the power to issue shares.
Note: For a company’s power to issue bonus, partly—paid, preference and redeemable preference
shares, see section 254A.
(2) A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or
would not be, served by doing it.
(3) For the avoidance of doubt, this section does not:
(a) authorise a company to do an act that is prohibited by a law of a State or Territory; or
(b) give a company a right that a law of a State or Territory denies to the company.
(4) Subsection (1) does not prevent a mutual entity that is a company limited by guarantee issuing MCIs.
Page 3 of 19The great advantage of adopting a company structure for carrying on a business is limited
liability. This means that the shareholders are not personally liable for the company’s debts.
The question of whether shareholders may be liable only occurs when a company does not
have enough assets to pay its debts. If this question arises the liability of shareholders in a
company limited by shares is limited to the amount, if any, unpaid on the issue price of their
shares (S 516 Corporations Act). Limited liability achieves a range of economic goals,
including facilitating enterprise and promoting efficiency in the market. If a company is
unable to pay its debts, this may have a significant effect on its creditors.
Company as a separate legal entity
The legal significance of a company as a separate legal entity was established in 1897 in the
English case of Salomon v Salomon & Co [1897] AC 22 (KEY CASE)4. The case is
especially important as in the case of A Salomon and Co, the company was essentially
owned and managed by one person alone. The facts and extracts from the judgments of the
House of Laws appear below.
ARON SALOMON (PAUPER) APPELLANT;
AND A. SALOMON AND COMPANY, LIMITED
RESPONDENTS.
AND
A. SALOMON AND COMPANY, LIMITED
APPELLANTS; AND ARON SALOMON
RESPONDENT.
[1897] AC 22
FACTS
LORD MACNAGHTEN. My Lords, I cannot help thinking that the appellant, Aron Salomon,
has been dealt with somewhat hardly in this case.
Mr. Salomon, who is now suing as a pauper, was a wealthy man in July 1892. He was a boot
and shoe manufacturer trading on his own sole account under the firm of “A. Salomon &
Co.,” in High Street, Whitechapel, where he had extensive warehouses and a large
establishment. He had been in the trade over thirty years. He had lived in the same
neighbourhood all along, and for many years past he had occupied the same premises. So
far things had gone very well with him. Beginning with little or no capital, he had gradually
built up a thriving business, and he was undoubtedly in good credit and repute.
It is impossible to say exactly what the value of the business was. But there was a substantial
surplus of assets over liabilities. And it seems to me to be pretty clear that if Mr. Salomon had
been minded to dispose of his business in the market as a going concern he might fairly have
counted upon retiring with at least 10,000l. in his pocket.
Mr. Salomon, however, did not want to part with the business. He had a wife and a family
consisting of five sons and a daughter. Four of the sons were working with their father. The
4 A key case is one which is important and will be examined in the final examination.
Page 4 of 19eldest, who was about thirty years of age, was practically the manager. But the sons were not
partners: they were only servants. Not unnaturally, perhaps, they were dissatisfied with their
position. They kept pressing their father to give them a share in the concern. “They troubled
me,” says Mr. Salomon, “all the while.” So at length Mr. Salomon did what hundreds of
others have done under similar circumstances. He turned his business into a limited
company. He wanted, he says, to extend the business and make provision for his
family.
All the usual formalities were gone through; all the requirements of the Companies Act, 1862,
were duly observed. There was a contract with a trustee in the usual form for the sale of the
business to a company about to be formed. There was a memorandum of association duly
signed and registered, stating that the company was formed to carry that contract into effect,
and fixing the capital at 40,000l. in 40,000 shares of 1l. each. There were articles of
association providing the usual machinery for conducting the business. The first directors
were to be nominated by the majority of the subscribers to the memorandum of association.
The directors, when appointed, were authorized to exercise all such powers of the company
as were not by statute or by the articles required to be exercised in general meeting; and
there was express power to borrow on debentures, with the limitation that the borrowing was
not to exceed 10,000l. without the sanction of a general meeting.
The company was intended from the first to be a private company; it remained a
private company to the end. No prospectus was issued; no invitation to take shares was
ever addressed to the public.
The subscribers to the memorandum were Mr. Salomon, his wife, and five of his children who
were grown up. The subscribers met and appointed Mr. Salomon and his two elder sons
directors. The directors then proceeded to carry out the proposed transfer. No other shares
were issued except the seven shares taken by the subscribers to the memorandum, who, of
course, knew all the circumstances.
The company had a brief career: it fell upon evil days. Shortly after it was started there
seems to have come a period of great depression in the boot and shoe trade. There were
strikes of workmen too; and in view of that danger contracts with public bodies, which were
the principal source of Mr. Salomon’s profit, were split up and divided between different firms.
The attempts made to push the business on behalf of the new company crammed its
warehouses with unsaleable stock. Mr. Salomon seems to have done what he could: both he
and his wife lent the company money… Then came liquidation and a forced sale of the
company’s assets. They realized not enough to pay the unsecured creditors, who were left
out in the cold.
The liquidator brought the action to try and have the agreement for the transfer of the
business to the company reversed and seeking that Mr Salomon should pay the outstanding
debts.
LEGISLATION
S 6 Companies Act 1862 (UK): ‘Any seven or more persons associated for any lawful
purpose may, by subscribing their names to a memorandum of association, and
otherwise complying with the requisitions of this Act in respect of registration, form an
incorporated company, with or without limited liability.’
Page 5 of 19LEGAL ISSUE and REASONING
LORD HALSBURY L.C. My Lords, the important question in this case is whether the
respondent company was a company at all — whether in truth that artificial creation of the
Legislature had been validly constituted in this instance; and in order to determine that
question it is necessary to look at what the statute itself has determined in that respect.
…The sole guide must be the statute itself.
Now, that there were seven actual living persons who held shares in the company has not
been doubted. As to the proportionate amounts held by each I will deal presently; but it is
important to observe that this first condition of the statute is satisfied, and it follows as a
consequence that it would not be competent to any one — and certainly not to these
persons themselves — to deny that they were shareholders. If they are shareholders, they
are shareholders for all purposes…
I am simply here dealing with the provisions of the statute, and it seems to me to be
essential to the artificial creation that the law should recognise only that artificial existence —
quite apart from the motives or conduct of individual corporators. …[I]t seems to me
impossible to dispute that once the company is legally incorporated it must be treated like
any other independent person with its rights and liabilities appropriate to itself, and that the
motives of those who took part in the promotion of the company are absolutely irrelevant in
discussing what those rights and liabilities are.
I will for the sake of argument assume the proposition that the Court of Appeal lays down —
that the formation of the company was a mere scheme to enable Aron Salomon to carry on
business in the name of the company. I am wholly unable to follow the proposition that this
was contrary to the true intent and meaning of the Companies Act. I can only find the true
intent and meaning of the Act from the Act itself; and the Act appears to me to give a
company a legal existence with, as I have said, rights and liabilities of its own, whatever may
have been the ideas or schemes of those who brought it into existence.
My Lords, I find all through the judgment of the Court of Appeal a repetition of the same
proposition to which I have already adverted — that the business was the business of Aron
Salomon, and that the company is variously described as a myth and a fiction. Lopes L.J.
says: “The Act contemplated the incorporation of seven independent bonâ fide members,
who had a mind and a will of their own, and were not the mere puppets of an individual who,
adopting the machinery of the Act, carried on his old business in the same way as before,
when he was a sole trader.” The words “seven independent bonâ fide members with a mind
and will of their own, and not the puppets of an individual,” are by construction to be read
into the Act. Kay L.J. says: “The statutes were intended to allow seven or more persons,
bonâ fide associated for the purpose of trade, to limit their liability under certain conditions
and to become a corporation. But they were not intended to legalise a pretended association
for the purpose of enabling an individual to carry on his own business with limited liability in
the name of a joint stock company.”
My Lords, the learned judges appear to me not to have been absolutely certain in their own
minds whether to treat the company as a real thing or not. If it was a real thing; if it had a
legal existence, and if consequently the law attributed to it certain rights and liabilities in its
constitution as a company, it appears to me to follow as a consequence that it is impossible
to deny the validity of the transactions into which it has entered.
Vaughan Williams J. appears to me to have disposed of the argument that the company
(which for this purpose he assumed to be a legal entity) was defrauded into the purchase of
Aron Salomon’s business because, assuming that the price paid for the business was an
exorbitant one, as to which I am myself not satisfied, but assuming that it was, the learned
judge most cogently observes that when all the shareholders are perfectly cognisant of the
conditions under which the company is formed and the conditions of the purchase, it is
impossible to contend that the company is being defrauded.
Page 6 of 19But if every member of the company — every shareholder — knows exactly what is the true
state of the facts (which for this purpose must be assumed to be the case here), Vaughan
Williams J.’s conclusion seems to me to be inevitable that no case of fraud upon the
company could here be established. If there was no fraud and no agency, and if the
company was a real one and not a fiction or a myth, every one of the grounds upon which it
is sought to support the judgment is disposed of.
The appellant, in my opinion, is not shewn to have done or to have intended to do anything
dishonest or unworthy, but to have suffered a great misfortune without any fault of his own.
The result is that I move your Lordships that the judgment appealed from be reversed, but as
this is a pauper case, I regret to say it can only be with such costs in this House as are
appropriate to that condition of things, and that the cross-appeal be dismissed with costs to
the same extent.
LORD HERSCHELL. My Lords, by an order of the High Court, which was affirmed by the
Court of Appeal, it was declared that the respondent company, or the liquidator of that
company was entitled to be indemnified by the appellant against the sum of 7733l. 8s. 3d.,
and it was ordered that the respondent company should recover that sum against the
appellant.
On July 28, 1892, the respondent company was incorporated with a capital of
40,000l. divided into 40,000 shares of 1l. each. One of the objects for which the company
was incorporated was to carry out an agreement of July 20, 1892, which had been entered
into between the appellant and a trustee for a company intended to be formed, for the
acquisition by the company of the business then carried on by the appellant. The company
was, in fact, formed for the purpose of taking over the appellant’s business of leather
merchant and boot manufacturer, which he had carried on for many years. The business had
been a prosperous one, and, as the learned judge who tried the action found, was solvent at
the time when the company was incorporated. The memorandum of association of the
company was subscribed by the appellant, his wife and daughter, and his four sons, each
subscribing for one share. The appellant afterwards had 20,000 shares allotted to him. For
these he paid 1l. per share out of the purchase-money which by agreement he was to
receive for the transfer of his business to the company. The company afterwards became
insolvent and went into liquidation.
The learned trial judge thought that the company was only an “alias” for Salomon; that, the
intention being that he should take the profits without running the risk of the debts, the
company was merely an agent for him, and, having incurred liabilities at his instance, was,
like any other agent under such circumstances, entitled to be indemnified by him against
them. On appeal the judgment of Vaughan Williams J. was affirmed by the Court of Appeal,
that Court “being of opinion that the formation of the company, the agreement of August,
1892, and the issue of debentures to Aron Salomon pursuant to such agreement were a
mere scheme to enable him to carry on business in the name of the company with limited
liability contrary to the true intent and meaning of the Companies Act, 1862, and further to
enable him to obtain a preference over other creditors of the company by procuring a first
charge on the assets of the company by means of such debentures.”
It is to be observed that both Courts treated the company as a legal entity distinct from
Salomon and the then members who composed it, and therefore as a validly constituted
corporation. This is, indeed, necessarily involved in the judgment which declared that the
company was entitled to certain rights as against Salomon. Under these circumstances, I am
at a loss to understand what is meant by saying that A. Salomon & Co., Limited, is but an
“alias” for A. Salomon. It is not another name for the same person; the company is ex
Page 7 of 19hypothesi5 a distinct legal persona….. Here, it is true, Salomon owned all the shares except
six, so that if the business were profitable he would be entitled, substantially, to the whole of
the profits. The other shareholders, too, are said to have been “dummies,” the nominees of
Salomon. But when once it is conceded that they were individual members of the company
distinct from Salomon, and sufficiently so to bring into existence in conjunction with him a
validly constituted corporation, I am unable to see how the facts to which I have just referred
can affect the legal position of the company, or give it rights as against its members which it
would not otherwise possess.
The very object of the creation of the company and the transfer to it of the business is, that
whereas the liability of the partners for debts incurred was without limit, the liability of the
members for the debts incurred by the company shall be limited.
It is said that the respondent company is a “one man” company, and that in this respect it
differs from such companies as those to which I have alluded. But it has often happened that
a business transferred to a joint stock company has been the property of three or four
persons only, and that the other subscribers of the memorandum have been clerks or other
persons who possessed little or no interest in the concern. I am unable to see how it can be
lawful for three or four or six persons to form a company for the purpose of employing their
capital in trading, with the benefit of limited liability, and not for one person to do so,
provided, in each case, the requirements of the statute have been complied with and the
company has been validly constituted.
It was said that in the present case the six shareholders other than the appellant were mere
dummies, his nominees, and held their shares in trust for him. I will assume that this was so.
In my opinion, it makes no difference. The persons who subscribe the memorandum, or who
have agreed to become members of the company and whose names are on the register, are
alone regarded as, and in fact are, the shareholders. They are subject to all the liability
which attaches to the holding of the share. They can be compelled to make any payment
which the ownership of a share involves. If, then, in the present case all the requirements of
the statute were complied with, and a company was effectually constituted, and this is the
hypothesis of the judgment appealed from, what warrant is there for saying that what was
done was contrary to the true intent and meaning of the Companies Act?
For these reasons I have come to the conclusion that the appeal should be allowed. It was
contended on behalf of the company that the agreement between them and the appellant
ought, at all events, to be set aside on the ground of fraud. In my opinion, no such case has
been made out, and I do not think the respondent company are entitled to any such relief.
LORD MACNAGHTEN.
The order of the learned trial judge appears to me to be founded on a misconception of the
scope and effect of the Companies Act, 1862. In order to form a company limited by shares,
the Act requires that a memorandum of association should be signed by seven persons, who
are each to take one share at least. If those conditions are complied with, what can it matter
whether the signatories are relations or strangers? There is nothing in the Act requiring that
the subscribers to the memorandum should be independent or unconnected, or that they or
any one of them should take a substantial interest in the undertaking, or that they should
have a mind and will of their own, as one of the learned Lords Justices seems to think, or
that there should be anything like a balance of power in the constitution of the company.
When the memorandum is duly signed and registered, though there be only seven shares
taken, the subscribers are a body corporate “capable forthwith,” to use the words of the
enactment, “of exercising all the functions of an incorporated company.” Those are strong
words. The company attains maturity on its birth. …The company is at law a different
5 Ex hypothesi is Latin and means “according to the hypothesis proposed”.
Page 8 of 19person altogether from the subscribers to the memorandum; and, though it may be
that after incorporation the business is precisely the same as it was before, and the
same persons are managers, and the same hands receive the profits, the company is
not in law the agent of the subscribers or trustee for them. Nor are the subscribers as
members liable, in any shape or form, except to the extent and in the manner provided by
the Act. …
Among the principal reasons which induce persons to form private companies, as is stated
very clearly by Mr. Palmer in his treatise on the subject, are the desire to avoid the risk of
bankruptcy, and the increased facility afforded for borrowing money. By means of a private
company, as Mr. Palmer observes, a trade can be carried on with limited liability, and without
exposing the persons interested in it in the event ot failure to the harsh provisions of the
bankruptcy law. A company, too, can raise money on debentures, which an ordinary trader
cannot do. Any member of a company, acting in good faith, is as much entitled to take and
hold the company’s debentures as any outside creditor. Every creditor is entitled to get and
to hold the best security the law allows him to take….
It has become the fashion to call companies of this class “one man companies.” That is a
taking nickname, but it does not help one much in the way of argument. If it is intended to
convey the meaning that a company which is under the absolute control of one person is not
a company legally incorporated, although the requirements of the Act of 1862 may have
been complied with, it is inaccurate and misleading: if it merely means that there is a
predominant partner possessing an overwhelming influence and entitled practically to the
whole of the profits, there is nothing in that that I can see contrary to the true intention of the
Act of 1862, or against public policy, or detrimental to the interests of creditors. If the shares
are fully paid up, it cannot matter whether they are in the hands of one or many. If the shares
are not fully paid, it is as easy to gauge the solvency of an individual as to estimate the
financial ability of a crowd.
I am of opinion that the appeal ought to be allowed, and the counter-claim of the
company dismissed with costs, both here and below.
….
.
Because a company is a separate legal entity, in the case of a one-person company the
controller of the company may also be an employee: see Lee v Lee’s Air Farming [1961] AC
12.
Companies which form a group are treated as separate legal entities even though they are
part of a group.
The veil of incorporation
The legal status of a company as a separate legal entity is often called the “veil of
incorporation”. The reason for this is that the courts are very reluctant to look behind the
“veil” in order to determined why the company was formed or who controls it.
There are limited circumstances in which the corporate veil will be lifted in order to make
individuals liable. These include:
● If the company is used as a vehicle for fraud
● If a company is used as a sham or to avoid legal obligations
● If a company knowingly participates in a director’s breach of fiduciary duty.
Page 9 of 19There are also statutory provisions in the Corporations Act which provide for
circumstances in which directors or officers may become individually liable.
Page 10 of 19Company registration process
Chapter 2A of the Corporations Act 2001 (ss 112-127) regulates the process
of Registering a company
Page 11 of 19Source:
https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-com
pany/
Steps to register a company
This section details how to register a company with us and the things you need to
keep in mind.
Step 1 – Is a company right for you?
You need to decide if a company suits your needs or if you should use a different
business structure. Business.gov.au has a great ‘Help me decide’ tool that can help
you work out the business structure that will best suit your needs and what
registrations you should consider.
A company is its own legal entity and lets you conduct business throughout
Australia. You can also make use of other privileges, such as corporate tax rates or
limited liability.
Registering a company is different to registering a business name.
Step 2 – Choosing a company name
There are a few things you should consider when choosing a company name.
A company’s name cannot be identical to an existing name
You can only use a name that is not identical to an existing company or business
name. Use our check name availability search to see if the name you want is
available.
If you are the holder of an identical name, you may be able to register the name for
the company in some cases:
Where the
business name
holder is…
the name is only available to the proposed
company if…
an individual that individual is a proposed company
director or member
Page 12 of 19a company that same company is a proposed member
a partnership or
joint venture
each of the partners is a proposed
company director or member
a trust each of the trustees is a proposed company
director or member, and you have provided
ASIC with a copy of the trust deed
Before May 2012, it was possible for multiple businesses with the same name to
exist as long as they were registered in different states and territories. This is no
longer possible under ASIC’s national register. You won’t be able to register a
company name if an identical name already exists.
You can only use certain characters in a company’s name
Some terms are restricted
Some words and phrases cannot be used without the approval of a government
minister. Some examples include:
● ‘bank’
● ‘trust’
● ‘Royal’
● ‘Incorporated’
You can’t use words that could mislead people about a company’s activities. This
includes associations with Australian government, the Royal Family, or any
ex-servicemen’s organisations.
ASIC may also refuse a name if it is considered offensive or suggests illegal activity.
Reserving a company name
If you aren’t ready to register your company but want to make sure a name is
available, you can apply to reserve it (Form 410).
If we approve your application, we will reserve the name for two months. If you wish
to extend this period, you’ll need to apply to reserve the name again.
We will not reserve a name for a long period as this prevents other people
from using the name to conduct business.
Check existing trademarks or names
Even if we reserve or register a name for you, a company with a similar trademark or
name may take action against you. It is your responsibility to be aware of any similar
names or trademarks that may affect your name.
A company’s name must show its legal status
Page 13 of 19A company must show the liability of its members and status in its name. For
example:
● if a company’s members’ liability is limited to the amount unpaid on their
shares, the name must end with ‘Proprietary Limited’
● if the members’ liability is unlimited, the company name must end with
‘Proprietary’.
Below is a list of approved abbreviations that can be used in a company’s name:
Full word Abbreviation
and &
Australian Business Number ABN
Company Co
Coy
No Liability NL
Australian Aust
Australian Company Number ACN
Limited Ltd
Number No
Proprietary Pty
To display a different name, you can register it as a business name. For example,
Apples Pty Ltd. can register ‘The Apple Fruit Store’ as a business name. This means
it can trade as ‘The Apple Fruit Store’ and display it on all its signage.
Step 3 – How will your company operate?
Page 14 of 19Before registering, you will need to decide how your company will be governed. Your
company can be governed by:
● replaceable rules
● its own constitution, or
● a combination of both.
Replaceable rules
Replaceable rules are in the Corporations Act and are a basic set of rules
for managing your company. If a company doesn’t want to have a constitution, they
can use the replaceable rules instead.
Using replaceable rules means your company does not need a written
constitution. This means you don’t have the expense of keeping it updated as the law
changes.
Constitution
A company can also have a written constitution instead of using replaceable rules.
Companies must keep a copy of their constitution with their company’s records.
See constitution and replaceable rules for more information.
Special rules for sole director/member proprietary companies
If a proprietary company has just one officeholder, they don’t need to follow
replaceable rules or have a constitution. If another director/member is appointed,
then replaceable rules automatically apply to the company. This can be changed to a
constitution at a later date.
Share structure
A proprietary company must have no more than 50 non-employee shareholders and
be either:
● limited by shares, or
● be an unlimited company that has share capital.
A proprietary company must not conduct any activity that requires disclosure to
investors. They may only offer shares to members of the company or
employees/subsidiaries of the company.
Step 4 – Understand your obligations as an officeholder
If you’re an officeholder of a company, you must follow the requirements in the
Corporations Act. This includes meeting your legal obligations , which includes:
● ensuring company details are kept up to date
● maintaining company records and details on the register
● paying the appropriate lodgement fees and annual review fees as required.
Officeholders are ultimately responsible for a company’s adherence to the
Corporations Act.
Step 5 – Get consent from officeholders, members and occupiers
Page 15 of 19You must get written consent from the people that will fill these roles:
● Director (must be over 18)
● Secretary (must be over 18)
● Member (every company must have at least one member).
At least one director and secretary of a proprietary company must ordinarily reside in
Australia.
At least two directors of a public company must ordinarily reside in Australia.
Get the consent of the owner of your registered office address
If your registered office does not belong to the company (e.g. it’s your accountant’s
office), you must get their written permission to use the address.
You don’t have to send copies of your written consent to us, but you do need to keep
these with your records. You must also set up a register to record details of the
members of your company.
Step 6 – Registering your company
Australian Government Business Registration Service
You can register a company using the Australian Government’s Business
Registration Service (BRS). BRS combines several business and tax registrations in
one place, making it even easier to start a business.
Register your company online
Contact a private service provider (PSP)
You can choose to register a company through a private service provider (PSP). This
could be your accountant, your solicitor, or another business that provides online
services with ASIC. They will usually charge a fee for their services above what
ASIC would charge.
Online exceptions
Some company types are unavailable to register online, including:
● a company with unlimited liability,
● a company with the individual share value more than four decimal places (e.g.
0.00042),
● a company that requires lodgement of a Form 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,
● a public company, with the Australian Company Number (ACN) as the
company name and where the company is ruled by a constitution,
● where a company officeholder place of birth causes an error,
Page 16 of 19● where a company address is not accepted by ASIC, and/or
● where an applicant is facing other extenuating circumstances.
If you wish to register one of the above company types, you need to request to
register via paper.
Step 7 – After your company is registered…
After your company is registered, make sure:
● the company’s name is on display wherever the company conducts business
and is open to the public
● the company’s ACN/ABN is displayed on any documents the company
publishes
● the company’s details are kept up to date
Page 17 of 19Post-registration requirements of a company
Page 18 of 19Tutorial Activities
(Reproduced from Lipton, Herzberg and Welsh, Understanding Company Law, 20th ed,
Thomson Reuters, 23, 78)
1. Go to ASIC’s website and look up its most recent Annual Report:
(a) What were the main strategies and priorities implemented by ASIC during the year?
(b) What are the corporate governance structures and practices of ASIC? How are
ASIC Commissioners appointed, and how do they carry out their responsibilities?
(c) What were the main activities of ASIC during the year in relation to financial
education, enforcement and consumer protection?
(d) Provide an example of a person successfully prosecuted by ASIC for criminal
offences. What type of offence(s) were involved and what was the penalty imposed?
(e) How many registered companies and business names were there in Australia at the
date of the report?
(f) Provide an example of an intervention by ASIC where it believed the law had been
breached in relation to the operation of securities markets.
2. Assume you wish to form a company. Complete the following tasks:
(a) Select an available name for your company.
(b) Fill in an application for registration form.
(c) What is the fee for lodging an application for registration with ASIC?
(d) What consents must be obtained before the application for registration can be
lodged with ASIC?
(e) Do you need to prepare a constitution for your proposed company? Why or why
not?
(f) Outline the books, records and registers that your company must establish after it
is formed.
(g) Can your company’s invoices set out its ABN instead of its ACN? Why or why
not?
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