The Australian Securities and Investments Commission (ASIC) is the sole national authority responsible for administering the Corporations Act 2001 (Cth), which regulates corporations as well as securities and future markets.
The Corporations Act 2001 (Cth) and the Corporations Regulations impose various statutory obligations on companies and their officers and prescribe penalties for failure to observe these requirements. Comprehensive information is available on the ASIC website.
Under the Corporations Act 2001 (Cth) a company may be of the following types:
- a company limited by shares that is, the liability of members is limited to the amount (if any) unpaid on that member’s shares;
- a company limited by guarantee that is, the liability of members is limited to the amount that the members undertake to contribute to the property of the company if it is wound up;
- a company limited by both shares and guarantees;
- an unlimited company, that is, a company where there is no limit on the liability of its members; or
- in the case of a mining company, a no liability company, that is, where the members cannot be required by the company to pay the amount (if any) unpaid on the members shares.
A company generally provides limited liability to its members and is a separate legal entity from the persons who constitute it. This means that:
- it has ‘perpetual succession’, that is, its existence is not terminated or otherwise affected by changes in its membership;
- it may sue and be sued in its corporate name;
- it may hold, deal and dispose of property in its corporate name. Title to all assets vests in the company;
- it has a common seal used for the purpose of signifying its assent to certain formal matters;
- the liability which the directors and members incur for the debts of a company limited by guarantee, is limited by the amount of guarantee as stated in the company’s Memorandum of Association.
Company Limited by Guarantee
A company limited by guarantee is the most likely type of company for a charitable or community organisation to choose. A guarantee simply means that a member ‘guarantees’ to contribute an amount, up to the specified maximum, should the company need to be liquidated and its assets are not sufficient to pay out its liabilities (that is, a member’s individual liability is limited to the amount of guarantee). A guarantee cannot be changed once the company is incorporated.
The benefits of a company structure are therefore fairly obvious. The decision is whether the costs and administration involved in setting up and operating a company is warranted by the operations of the organisation.
In many cases it will be, but if the organisation does not intend to operate for long and is not entering into financial transactions of any significance, the costs of administration involved may not be worthwhile.
See the ASIC website for details on choosing a name, the requirements to show the legal status of the company, name restrictions, problems with similar names, the use of an Australian company number (ACN), and reserving a company name.
Every company must have a set of rules that govern its internal management All companies must have either:
- a single set of rules called a constitution, under sections 135 or 136 of the Corporations Act; or
- a basic set of rules, or replaceable rules – set out at section 141 of the Corporations Act, which apply unless there is a constitution to replace part or all of them.
For a guide to this process see the ASIC website.
The following steps must be taken to incorporate:
- select and reserve the name of the company (Form 410);
- prepare and sign the basic set of rules or the Constitution of the company;
- decide who will be the first director who must be over 18 and consent in writing to act as a director.
These written consents do not have to be lodged with the ASIC but must be kept in the files of the company.
- Complete and lodge Form 201 – ‘Application for Registration as an Australian Company’ together with the prescribed fee.
In addition to the Form 201 and prescribed fee you must also lodge:
- the Constitution - if there is one - of the proposed company; and
- Form 305 listing the persons who have consented to be directors of the company. This form must be signed by one of the proposed directors, certifying the list is correct.
Once the documents have been lodged with the ASIC and approved and processed, a Certificate of registration of the company will be issued to you.
Within one month after incorporation, you must lodge a ‘Notification of Initial Appointment of Officeholders’ (Form 215).
Following incorporation, the following steps should be taken:
- Form 215 should be lodged at the ASIC – no charge if lodged within 1 month;
- A common seal for the company must be obtained from a rubber stamp, manufacturer;
- A bank account should be formed for the company;
- A tax file number may need to be obtained first and the bank will usually require a copy of the rules and to sight the Certificate of Incorporation;
- They may also require a copy of the minute authorising the signatories to operate on the account;
- A secretary and public officer need to be appointed;
- Notice of the public officer needs to be sent to the Taxation Office stating the name of the person and an address for service of notices;
- A consent by the secretary is necessary;
- The company needs to appoint an auditor;
- Certain books and registers must be established, for example minute books for meetings of members and directors and a register of directors, managers and secretaries.
It is advisable to obtain a loose-leaf company register which conveniently classifies the required documents by way of tab references, for example, tabs for ‘Certificate of Incorporation’, ‘Minute Book… Directors’, ‘Minute Book…Members’, ‘register of Directors/Managers/Secretaries’, ‘Companies Office’, ‘Common Seal Register’ and so on. Such a company register is convenient and is well worth buying.
Most of the above will be done at the first meeting of the company.
Every company must have a registered office within Australia to which all communications and notices must be sent. Where the company has given the ASIC notice of office hours under section 145(2). The office must be open to the public for at least three hours between 9:00a.m. – 5:00p.m. on each business day. If no such notice has been given, the office must be open to the public for at least four hours between such times.
If you change the place of your registered office you must notify the ASIC within 7 days on ‘Notification of Change of Office Hours or Address of One or More Corporations’ (Form 203). No fee is payable if the form is lodged within this time.
Books and Registers
The Corporations Act 2001 (Cth) requires every company to keep certain books and registers. The registers must be kept in a form that enables them to be inspected and they must be kept at the registered office, principal place of business or other address as prescribed by the Corporations Act.
The book and registers which must be kept by the company include the following:
- register of members;
- register of directors, principal executive officers and secretaries;
- register of charges and mortgages;
- minutes of all proceedings of general meetings and of meetings of directors;
- such accounting and other records as will sufficiently explain the transactions and financial positions of the company and enable true and fair profit and loss account.
Notices and Lodgement
While the company remains registered, it must comply with the provisions of the Corporations Act 2001 (Cth), must lodge annual returns even though it may not be carrying on business and must lodge notices with the ASIC from time to time in relation to certain matters, including the following:
- if there is any change in officeholders or the address of office holders, details must be lodged on Form 304 – ‘Notification Of Change To Office Holders’ within one month of the change and if this is done, no fee is payable;
- if there is any change in the address or hours of the registered office;
- details of the passing of any special resolution must be lodged on Form 205 – ‘Notification Of Resolution’ within the time prescribed by the Corporations Act 2001 (Cth) in relation to the subject of the resolution;
- details of any charge given over the assets of the company must be lodged on a ‘Notification Of Details Of A Charge’ with a copy of the document by which the charge is created (Form 309).
Name and ACN
Any document lodged with the ASIC must clearly identify the name of the Company and its ACN, the title of the document and the name, address and telephone number of the lodging party.
Documents (other than prospectuses, trust deeds, takeover documents and securities industry licence documents) may be lodged over the counter at any ASIC Business Centre or with a local ASIC Representative.
There are two types of meetings of the members of a company:
- the annual general meeting (AGM); and
- general meetings.
Every company must hold an AGM at least once in every calendar year and within five months (or in the case of an exempt proprietary company, six months) after the end of its financial year. Provided a company holds its first AGM within 18 months of its incorporation (and within five or six months of the end of its financial year) the first AGM need not be held within its first or second financial year. If the company fails to hold an AGM, the company and any defaulting officers are guilty of an offence. In certain circumstances, however, ASIC may grant an extension of time for the holding of the AGM.
The business before an AGM is to a large extent specified in the Corporations Act 2001 (Cth) and the articles and will include as ‘ordinary’ business of the AGM, the following:
- consideration of all the accounts and the directors and auditor reports and statements in relation to those accounts;
- declaration of dividend;
- election of directors in place of those retiring;
- appointment (where appropriate) of auditors.
All other business at the AGM is ‘special’ business.
General meetings are meetings of the members of the company other than annual general meetings. The manner and time for calling the AGM or other general meetings of the company and the proceedings at such meetings are governed by the Corporations Act 2001 (Cth) and the articles of the company.
State Control Over Companies
A company has less control exercised by government bureaucracies over its operation than a society registered under the Cooperatives Act 1999 (Tas). The main control is in the requirement to have an audit each year and to lodge an annual return.
Apart from these requirements a company, in framing its Constitution, may determine who can be members, who can vote at meetings and how the company is to be operated. A company structure may be appealing for this reason.