When setting up a new business, choosing a business structure is one of the most important decisions. If you decide on a company or trust structure, you then need to nominate a state or territory for registration and governance. We answer four frequently asked questions below to help you determine which jurisdiction is most appropriate to set up a trust or company.
1. Why Do I Need to Select a State or Territory?
The Corporations Act 2001 (Cth) (‘the Act’) sets out the laws that apply to all Australian companies. Under section 117(2)(n) of the Act, you must nominate a state or territory to register your company. You can make this nomination using a Form 201 from the Australian Securities and Investments Commission (ASIC). After registration, the state or territory is listed on the company’s certificate of registration and is shown on the ASIC register.
2. How Do You Choose Which State or Territory to Register Your Company?
Under the Act, there is little guidance as to which state or territory you should register your company. However, section 119A, Note 3 of the Act reinforces that the states and territories can confer obligations, rights or powers on a person by reference to the state or territory in which they have registered their company.
For example, if you registered your company in New South Wales, then NSW’s laws dealing with stamp duty will apply. As a result, many people register their company in the state or territory in which they primarily conduct business or reside.
3. Why Do Trusts Have a Governing Law Clause?
If you are establishing a trust, it is important to state the chosen jurisdiction in the trust deed. This helps to remove uncertainty as to which laws apply to the trust (in the event of a dispute) and which courts have authority over any disputes arising in connection with the trust. However, even if all parties choose a particular court’s jurisdiction, this can be overruled by the courts if it is not deemed appropriate.
4. How Do I Determine the Most Appropriate Jurisdiction For My Trust?
If your trust deed does not include an express or implied submission to jurisdiction, the court will distinguish which state or territory the trust has the closest and most real connection with by considering the following:
- where the trustee(s) will conduct the administration of the trust;
- where the trustee(s) holds the assets of the trust;
- the residence or place of business of the trustee(s);
- the purpose of the trust, and
- where the trustee(s) will fulfil this purpose.
Each of the above factors is important when considering which jurisdiction will govern your trust and you need to consider them equally.
If you are setting up a company or trust and unsure about which jurisdiction you should choose to register or govern the business, get in touch with our business lawyers on 1300 544 755 or fill out the form on this page.
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