Corporations/Companies
A corporation or a company is commonly used as a trading entity and is governed by the Corporations Act 2001 (Cth). The Australian Securities and Investment Commission (ASIC) enforces the Corporations Act. There are different types of companies but most commonly known companies are public companies and proprietary companies.
Public Companies
Public companies, some of which are also listed on the Australian Stock Exchange (ASX) (see also ASX Listings), have more than 50 shareholders (members). A public company must have at least 3 directors, 2 of whom are normally resident in Australia and have a company secretary. Directors are appointed at a general meeting and sometimes at an earlier time to be later on confirmed at the general meeting. There are certain restrictions and qualifications to appointment as a director of a public company. The public company is generally managed by a board of directors.
Proprietary (Private) Companies
Most small to medium enterprises (SMEs) operate as proprietary companies. You can have up to 50 shareholders of a proprietary company and have a sole director who is normally Australian resident. There is no requirement to have a company secretary. If there is more than one director, each director does not have to be appointed by a separate resolution. The powers of appointment and removal of directors are stated in the company's constitution and there is no statutory right of shareholders to remove them. There is also no requirement to have a company auditor and a proprietary company does not need to hold annual general meetings.
Advantages of a company
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you need only one shareholder and can have unlimited shareholders for a public company and up to 50 shareholders for a proprietary company
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liability of individual shareholder is limited to the amount of unpaid shares
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as opposed to sole trader or partnership, the business risk is spread to a lot more people
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ownership of assets lies with the company and not individual shareholders
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a company can issue shares to raise capital
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a company can sue or be sued in its name rather than in the names of the shareholders
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a company can continue in existence notwithstanding death or bankruptcy of a shareholder
Incorporating a company
You are able to purchase a "shelf" company, which is already registered but is inactive and use the same name or change its name. Alternatively you may instruct your solicitor to register a company with your preferred name. The company comes into existence once it is registered by ASIC. A unique 9 digit number is allocated to the company called the Australian Company Number (ACN).
A company must have a constitution which sets out rules for internal management of the company. Basic rules are contained in the Corporations Act which can be adopted by the company. Some of the rules are mandatory whilst other rules in respect of internal management are replaceable.
The registered office of the company must be in Australia and ASIC must be kept informed of the address of the registered office. If the principal place of business of the company is different from the registered office, ASIC must be informed of this as well.
A company must keep a register at either its registered office or principal place of business which contain things such as a copy of its constitution, details of officer holders and minutes of meetings of office holders. A company must also keep a register of shareholders and also a register of charges.
You should consult your solicitor before incorporating a company to advise you whether it is an appropriate vehicle for your business, who should be the shareholders and officeholders of the company and their responsibilities.
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Corporations/Companies Articles
Business & Commercial Law - Franchising Law - Franchising Code of Conduct
Date: May 29, 2009
Author(s): LAC Lawyers
Franchising in Australia is governed by the Franchising Code of Conduct (“FCC”). This piece of legislation was design to protect potential franchisees from unscrupulous franchisors and requires the franchisor to disclose certain information to the franchisee so as to...
Business Law - Business Structures - Companies
Date: April 22, 2009
Author(s): LAC Lawyers
A company is a form of business organisation made up of members or shareholders and managed by directors.
Choosing a business structure - Which one is right for you?
Date: September 25, 2005
Author(s): LAC Lawyers
When starting out in business or changing the nature of your business you need to consider which method of operating the business is best for you.
In Brief - The Steps Involved in Commencing and Running a Civil Action
Date: March 15, 2010
Author(s): Pheba Netto LL.B. (Hons)
A brief rundown of the steps involved in running a cicil action. For more information fill free to call LAC Lawyers on 1300 799 888. LAC Lawyers = RESULTS
Is it the beginning of the end for discretionary trusts and one-man companies - A change of view point
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
There are suggestions that Australian courts are now changing their approach to the interpretation of statutes with the effect that discretionary trusts are not as useful in avoiding statutory obligations. In other words, in the words of the Bob Dillon song “… the times, they are a-changin”!
Is it the beginning of the end for discretionary trusts and one-man companies - Centrelink, Bankruptcy and Taxation
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
Another example is Elliott v. The Secretary of the Department of Education, Employment and Workplace Relations decided in 2008 immediately before the High Court of Australia’s decision in Spry and was concerned with the means test for Centrelink pensions.
Is it the beginning of the end for discretionary trusts and one-man companies?
Date: September 01, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
The traditional usefulness of discretionary trusts arises from the puzzling position they hold in the law. Property transferred to these entities is effectively ownerless until discretionary trustees determine to appoint the property to discretionary beneficiaries.
Reversal Of Effect Of Sons Of Gwalia Decision - Ending Of Equal Ranking Of Shareholder Claims With Claims Of Unsecured Creditors In Corporate Insolvency
Date: July 30, 2010
Author(s): Michael Pickering B.A., LL.B. (Hons.), LL.M., M. A.
The Corporations Act will be amended so as to reverse the decision of the High Court of Australia in Sons of Gwalia v. Margaretic. The Sons of Gwalia decision determined that, in a corporate insolvency, certain shareholder claims against a company rank equally with the claims of other unsecured creditors.
What to expect when you call LAC Lawyers
Date: December 13, 2006
Author(s): LAC Lawyers
LAC Lawyers is a full service firm dedicated to the provision of superior legal services in Australia. Our aim is to provide unrivalled client satisfaction coupled with high quality service and advice. When you call LAC Lawyers our friendly reception staff will spend time with you to identify the area of law your enquiry relates to then pass you on to one of our qualified solicitor's who can help you.