The Corporations Act 2001 (Cth) regulates companies in Australia, from their incorporation through to their winding up. A company differs from other business structures because it is a separate legal entity and has limited liability.
If you are a company director, it’s important to understand your duties under the Corporations Act and general law, which include:
- acting in good faith;
- exercising care and diligence;
- avoiding conflicts of interest; and
- not trading while insolvent.
A director can be held personally liable for breaching their directors’ duties. In some instances, these duties can also extend to company officers (e.g. company secretary or senior management).
Your company will require certain legal documents to govern the relationship between the business and its shareholders. The replaceable rules in the Corporations Act apply, or the Company can choose to supplement or replace these with a constitution and a shareholders agreement. Both a company constitution and the replaceable rules will address matters such as:
- shares (including issue, transfer and sale);
- board meetings and quorum; and
- appointment and removal of directors.
A shareholders agreement is a bespoke agreement between your company and its shareholders, with tailored provisions regarding shareholders and directors’ rights and responsibilities, meeting requirements, share issue requirements, share sale requirements, share vesting, dispute resolution and company sale.