Home » What Should You Know About Australian Company Laws?

What Should You Know About Australian Company Laws?

Australia is a federation made up of six states two territories on the mainland and seven territories outside of it. It has around 25 million. Its federal administration is located in Canberra, which is the capital city. Canberra However, more than 70 per cent (over 70%) of Australians reside in the main cities along the coast of Australia’s.

Australian company law offers a variety of opportunities to invest in Australia. We’ve put together the top ten aspects of Australian legal framework that can be of interest to foreign investors. Take a look at the abbreviated version below for a quick overview of the current state of corporate law in Australia in the present.

1. Regulation Scheme

The Corporations Act 2001 regulates companies and their incorporation, acquisition of shares, securities , and the derivatives sector.

The Corporations Act, together with other legislations create a common corporate regulatory framework that is in force across all Australian states and territories.

2. Australian Securities and Investments Commission (ASIC)

The Australian Securities and Investments Commission (ASIC) is an organisation in the federal government with the responsibility of administering the Corporations Act and has a vast array of powers. It is a enforcement and regulator. It is also the main registration and data source in business concerns.

ASIC has broad investigative powers pursuant to the Australian Securities and Investments Commissions Act in order to uncover the underlying misconduct, collect evidence to initiate criminal proceedings, stop illegal conduct , and even initiate civil proceedings against those who violate the Corporations Act.

3. The incorporation (or “registration”)

A company is a distinct legal entity from its directors and shareholders. It is able to possess property, enter into contracts, and even commence legal proceedings under the company’s name. It is the most popular type of business organization in Australia.

Companies are registered by the Corporations Act which involves appointing directors (one of which must be a resident of Australia) and issuing shares, naming an office registered in Australia and lodging copies of the constitution of the company with ASIC (although it are no requirements for companies with a constitution except if it’s an publicly traded company or founded for a particular reason).

After being registered with ASIC every company is issued an individual number of nine digits. Australian Company Number (ACN) that must be displayed on the company’s official documents (unless the company is registered with already registered an Australian Business Number (ABN) that is comprised of the business’s ACN and in that case, it may display the ABN instead of an ACN. Foreign corporations and other companies that are required to sign up pursuant to the Corporations Act also receive identification numbers referred to by”the Australia Registered Body Number (ARBN).

4. The type of company

The two main kinds of companies covered by the Corporations Act are public and proprietary companies that are limited by shares. Both require an official registered office in Australia in which communications can be made and the case is an open company the registered office needs to be accessible for public access. Each company also has to be led by the designation of a “public official” who is accountable for executing the obligations imposed by Australian tax laws. A director of a business, the public officer of the company as well as the secretary of a publicly traded corporation must reside in Australia (however it is possible that the same person could fulfill the roles of secretary and director simultaneously).

Public Company

A public company can sell its stock for subscription or sale to the general public. There is no limit regarding the sale or subscription of shares. The company must have at minimum three directors, and not less than two of them are residents of Australia and also at the very least one shareholder. It is not required for a public corporation to list with the Australian Stock Exchange (ASX) however it must have its Annual General Assembly (of the shareholders) at least once in the calendar year and within 5 months after the end of the financial year , in which the audited financial statement of the company as well as director’s reports must be made available.

Proprietary Company

It is designed for a tiny number of shareholders (not over fifty non-employee shareholders) the company is able to restrict the selling of its shares. It is the most frequently used type of business in Australia.

It should have at the very least one director and a shareholder (who could also be the exact same individual) and at minimum one director who lives in Australia.

Proprietary firms are classified as small or large-sized proprietary firms The latter can be considered to be less prone to reporting requirements on financials in the event that it meets at minimum two of the following requirements:

The entity that the company controls and any other entities it manages should be able to report a consolidated gross operating income that is under $25 million in the fiscal year in question;
The total value of its gross assets consolidated and its assets from any other entities it manages in the event of any, are not more than $12.5 million at the close of the financial year.
The business and the companies it owns are, if applicable, with less than 50 employees at the close of the fiscal year.

5. Directors and Officers

The management and control of the company is vested in the directors’ board which is appointed by the shareholders. Directors and other individuals acting as directors, like managers are liable to the company and shareholders certain obligations that are owed under general 澳大利亚 公司 法 and in particular, the Corporations Act and other legislation. It is crucial to remember that even if an individual isn’t legally appointed director, they could be considered to be one in the event that they act as if were a director, or if the board acts generally according to their directives. The obligations officers and directors are required to fulfill to the Corporations Act are:

To behave with the diligence and care of a responsible person;
to act with good faith and with the right reason;
To prevent conflicts of interest;
To prevent improper use of position
To prevent improper use of information
To avoid insolvent business to avoid insolvency
To disclose or provide certain information, such as financial information, to its shareholders.

Any breach of these obligations can lead to serious consequences, including the possibility of exposing directors to personal or criminal financial responsibility or, in some cases, both.

6. Recording Requirements for Reporting and records

The scope of reporting obligations is determined by the size and the activities of the company , as well as whether it is an entity that reports. Businesses that conduct business in Australia are subject to various obligations to:

Maintain various records and keep different registers pertaining to their actions
Keep their accounts in line with accounting principles that are generally accepted and which are regularly applied throughout Australia
Create the annual financial statement and annual reports and give copies to shareholders
Make copies of the statements to ASIC and If appropriate If applicable, ASIC and, if applicable, the Australian Stock Exchange (ASX)
In certain situations, you can create consolidated financial statements that include the financial aspects of a particular group of businesses
Request the production of directors’ reports regarding the performance of the business
Certain companies need to they have their accounts regularly audited with an auditor independent of the company who’s resident of Australia
Inform about significant issues that affect their performance or future prospects with ASIC or, when appropriate the ASX.

7. Australian Stock Exchange (ASX)

Public companies can seek to obtain funds from the public through placing their shares on ASX this option is also available for companies that are incorporated abroad. The ASX lists the shares of companies that are public and allows trading of these shares.

Listing is a costly procedure and businesses must satisfy the stringent financial requirements laid by the ASX Listing Rules, as in addition to meeting the all ongoing reporting requirements, as well as additional requirements under the Corporations Act. Prospectus documents must be provided to investors that describe the company’s position and future prospects.

The company must be able to count at least 300 non-affiliated shareholders that have holdings of an amount of at least $2,000 per and a free float of at least 20 percent. The company must also meet one of the following:

The test of profits ($1 million in aggregated profits from ongoing operations during the last three years, and $500,000 of consolidated profit from ongoing operations in the past 12 months

or

The test for assets ($4 million in net tangible assets an estimated total market cap of $15million)

8. Crowd-Sourced Financing

Australia has recently passed legislation that permits (eligible) small and start-up businesses to raise capital through offering securities to a huge amount of investors without prospectus.

9. Managed Investment Schemes

Managed investment plans that are regulated under the Corporations Act are defined to comprise any arrangement in which an operator is responsible for managing an investment which is managed by at least one or more passive investors in addition to an issue of stock or any other security to the company.

In order to register a managed-investment scheme, the manager or operator administrator must belong to an Australian public corporation that holds the Australian financial services license, that permits it to operate the scheme that is registered. There is a substantial expense associated with establishing the registration, registration and operation of a managed investment scheme that is licensed and the operating constitution must contain adequate provisions for the requirements set out by the Corporations Act and have a compliance plan describing the procedures that have to be implemented to ensure the compliance. There are a few exemptions from the rules of scheme for small-scale schemes or those which only have advanced investors, however, these exemptions are subject to strict limitations on their application.

10. Acquisition of Businesses

The acquisition of a business can be done through two main methods (each of that has its own benefits):

The company’s assets may be acquired (in this case, the business itself is not being acquired) and
Shares of the corporation that controls the business can be bought.

The rules are complex when it comes to public corporations. For example, special take-over laws are in place when a company has 20 percent of the shares in:

A listed company or
An unlisted business with over fifty employees.

Furthermore taxes and the impact of stamp duty have to be taken into consideration, and not in all jurisdictions, where Stamp duty (which is a tax imposed by the state) is just called duty.