A company structure is one of the most popular business structures in Australia. The fact that a company is a separate legal entity and has limited liability makes it an attractive option for business owners looking to grow their operations. However, company incorporation is relatively more complex than some other business structures (compared to sole traders and partnerships) and often requires more to comply with its legal obligations. This article details the process of how to incorperate a company.
Registration of a Company
Setting up a company is a complex process. The Australian Securities and Investment Commission (ASIC) oversees and regulates the company incorporation process. To set up a company, you must:
- determine the type of company you wish to incorporate;
- decide on an appropriate structure for internal governance;
- obtain the consent of each proposed director and a secretary;
- choose and reserve a name for the new company;
- locate an address for the company’s registered office;
- locate a principal place of business;
- settle on a share structure and members;
- make an application to ASIC and pay a registration fee; and
- receive a certificate of registration.
Type of Company
The kind of company that you wish to incorporate affects the documents you need to include in your application for registration. If you wish to set up a company limited by shares or an unlimited company, you will need to include information about:
- what class of shares each member has agreed to take up;
- the amount they will pay;
- whether they will pay fully upon registration; and
- if they will beneficially own the shares.
Similarly, a company limited by guarantee must include details in their application of the proposed amount of the guarantee that each member has agreed to.
Most companies require an internal governance structure for company incorporation. The exception is a proprietary (private) company with a single shareholder and director. For these companies, the Corporations Act (the Act) prescribes rules which are non-negotiable.
The matters included under the internal governance include issues such as:
- procedures for meetings of directors and members;
- share transfers; and
- the appointment and removal of directors.
A company can either draft a constitution or use the Replaceable Rules in the Act. Replaceable Rules apply where a constitution has not been drafted for the company. Alternatively, it can do both. However, if a company relies on the Act, their internal governance systems are automatically current and up to date.
Directors and Secretary
Every person who applies to register a company must have the written consent of all proposed directors to act in that role and, if necessary, that of a company secretary. An individual does not need to give these to ASIC when they register their company. However, they should keep them with their other records after company incorporation.
An individual can choose a name for their corporation. If they do, they need to reserve the name and then register it. ASIC manages both processes. Alternatively, a company can use the Australian Company Number issued to it by ASIC.
All companies with more than one shareholder need a shareholders agreement. This is an agreement between two or more shareholders on their roles and responsibilities.
To complete company incorporation, an individual needs to complete Form 201 and pay the prescribed fee. The form is available online. Once ASIC has registered a company, they send a Certificate of Registration to the company’s registered office. The Certificate must be visible in the company’s principal place of business.
A company’s minute book records proceedings of meetings of directors and members. It also records any resolutions made during such meetings.
Appointment of Auditor and Public Officer
If a company is a public company, it must appoint an auditor within one month of incorporation. It must also formally record the appointment. Similarly, every company needs a public officer to comply with its tax obligations. The company needs to appoint a public officer within three months of incorporation and formally record the appointment.
The Act requires a company to keep and maintain up to date registers of:
- option holders; and
- debenture holders (if relevant).
These registers can be electronic or in a book. If they are electronic, they must be capable of conversion to hard copy.
A company will also need all appropriate tax registrations. It will need an Australian Business Number and a Tax File Number. Depending on the kind of business, it may need to register for Goods and Services Tax as well as Pay As You Go Withholding. It will also need a bank account in the name of the company.
All companies have ongoing compliance and reporting requirements. These vary according to the type of company. For example, public companies have greater responsibilities in this regard than small proprietary ones. The onus is on the company to know and meet all their obligations under the Act.
If you are considering starting a company, there are a number of different steps that you must take. You should:
- decide on the type of company;
- enact a governance structure;
- appoint appropriate staff;
- complete the relevant registration forms; and
- comply with your legal requirements.
If you have any questions about starting a company, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form below.
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