Corporate Law is designed to provide you with knowledge and understanding of the key legal principles and policy issues relevant to registered companies.
- Context of Australian corporations law
- he incorporation process
- the corporate constitution
- Corporate personality
- Corporate governance
- Company’s dealing with outsiders
- Basic principles of corporate funding
- Voluntary administration
FUNDAMENTALS OF AUSTRALIAN CORPORATE LAW
- Corporate Personality and the Incorporation Process
- The Corporate Constitution
Think! Why might you choose to incorporate? How are companies incorporated? What is a company? What are the types of companies? What are the effects of incorporation?
The primary reason why an individual or persons would choose to incorporate a company, as distinct from running as a sole trader or in a party’s own individual name is due to the concept of a separate legal entity. A company is an artificial person created by law. It is separate from its directors, shareholders, investors and employees. A company is proportionately responsible for payment of its own debts; the shareholders, directors and employees are not personally responsible for the debts of the company except in limited circumstances and to limited amounts. As a separate legal entity, the company can do all things that an individual person can do i.e. acquire and own property, can sue and be sued in its own name. A company is able to do things that an individual person cannot do i.e. issue shares in itself (use itself to raise capital).
One of the primary reasons why you would choose to incorporate a company is the concept of succession planning – creating a business that may exist beyond your natural lifetime. A company is a logical option as a company will continue to exist regardless of the makeup of its directors. A company exists from registration until deregistered. Another reason is that a company has tax advantages i.e. attracts a lower tax rate than an individual tax rate.
A company is an effective vehicle to conduct business.
How to Incorporate?
- Reserve the company name: ss152 and 601DA, CA
- Lodge an application with ASIC: s117(4), CA
- Include information required by s117(2)(a)-(n), CA
- Public companies include their constitution: s117(3), CA
- Pay registration fee
- ASIC may register the company, issue the certificate of registration and an ACN: s118(1), CA
Types of Companies
- Liability of members
- Public or private
- Listed or unlisted
- Relationships with other companies
Note: Only public companies can be listed, but not all public companies must be listed. You cannot have a private listed company.
Liability of Members
- Companies limited by shares
- Companies limited by guarantee
- No liability companies
- Unlimited liability companies
The most common form of company in Australia are those companies limited by shares. Companies limited by guarantee are predominantly non-profit companies i.e. charitable organisations. No liability companies are typically mining companies. Unlimited liability companies are generally law firms and accounting firms.
What are Proprietary Companies?
Proprietary limited companies are those ‘private’ companies which have “Pty Ltd”. There are several benefits in conducting a Pty Ltd company. There are 2.7M proprietary companies in Australia. Pty Ltd Companies must be limited by shares and are considered small: s45(b),CA.
A proprietary company:
- Must be limited by shares or an unlimited company with a share capital: s112, CA.
- Companies limited by shares and unlimited companies can be large or small: s45A(1)-(6), CA.
- Small proprietary companies have reduced financial reporting requirements: s292(2), CA.
- Must have at least one member (s114,CA) and one director (s201A,CA) – This can be the same person.
- Must not have more than 50 non-employee shareholders if it is to be registered, changed or remain a proprietary company: s113, CA.
What is a Director?
s9, Corporations Act 2001 (Cth) – (“s 9, CA“):
director of a company or other body means:
(a) a person who:
(i) is appointed to the position of a director; or
(ii) is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b) unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person’s instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person’s professional capacity, or the person’s business relationship with the directors or the company or body.
The Organs of the Company
- Directors acting as a Board
- Members acting in General Meeting