| Introduction: | | | | director and sole shareholder. |
| This article explains the basic steps to take when | | | | Benefits of a constitution: |
| setting up a new company in Australia. Although each | | | | A company’s constitution has the effect of a |
| state has small discrepancies, the basic procedure, | | | | contract between the company and each member, |
| outlined below, is the same. | | | | between the company and each director and |
| There are many company structures in Australia – | | | | secretary, and between a member and each other |
| the most commonly chosen is the ‘proprietary | | | | member. |
| company’. These are denoted by the words | | | | If you choose a constitution come registration time, |
| “Pty Limited” or “Pty Ltd”. To help you | | | | each person specified in the application must agree in |
| differentiate, here are the major differences between | | | | writing to the terms of the constitution before the |
| public and proprietary companies are: | | | | application is lodged. Simply – they sign the |
| • Proprietary companies must have at least 1 | | | | document. |
| shareholder but no more than 50 non-employee | | | | A company may modify or repeal its constitution by |
| shareholders. Public companies must also have at least | | | | passing a special resolution, that is, a resolution passed |
| 1 shareholder, however, there is no limit on the number | | | | by at least 75% of the votes cast by shareholders |
| of shareholders; | | | | entitled to vote on the resolution. |
| • Proprietary companies must have at least 1 | | | | Replaceable Rules: |
| director who must ordinarily be resident in Australia. | | | | A table of replaceable rules can be found in section |
| Conversely, public companies must have at least 3 | | | | 141 of the Corporations Act 2001. The table indicates |
| directors – 2 of whom must ordinarily be residents | | | | the subject of the rule and the relevant section of the |
| in Australia; | | | | Corporations Law that covers each rule. We suggest |
| • Proprietary companies cannot engage in any | | | | you print the rules that are relevant to your company |
| activity that would require the lodgement of a | | | | and distribute them to the members so that everyone |
| prospectus (except for an offer of shares to existing | | | | knows what is expected of the company. |
| shareholders or employees); and | | | | 3. Consent from members, directors and secretaries: |
| • Proprietary companies are not required to appoint | | | | A proprietary company must appoint at least one |
| an auditor. | | | | director and one secretary both of who must live in |
| 1. Registration: | | | | Australia. Written consent is required for each person |
| A company is a legal entity which is born when it is | | | | who agrees to become a director of a company. The |
| registered with the Australian Securities and | | | | same person may act as director and secretary. To |
| Investments Commission (ASIC). In the eyes of the | | | | be eligible for directorship, a person must not: |
| law, it is treated as an individual, separate from the | | | | • Be under 18 years old; |
| existence of its directors, employees and so on. Thus, | | | | • Be insolvent under administration; |
| a company has the power to own and dispose of | | | | • Have been convicted of any serious offences as |
| property, sue and be sued, and enter into contracts. | | | | specified in the Corporations Act 2001; or |
| The name: Choose a name and ensure it is available | | | | • Be banned by a court or ASIC from managing a |
| and suitable for registration by searching the | | | | corporation. |
| ASIC’s name database. A company name must | | | | Note: the written consents are not lodged with the |
| indicate the company’s legal status. So a | | | | registration application. However, the applicant for the |
| proprietary company must include the word | | | | registration must have the relevant consents when the |
| “Proprietary” or the abbreviation “Pty” in | | | | application is lodged with ASIC and must give the |
| its name. Although you might be taken by a particularly | | | | consents to the company after the company |
| quirky name, some words and names cannot be used | | | | becomes registered. Consents must be kept with the |
| in company names without Ministerial approval. | | | | company’s records and directors and members |
| These include words such as “building society”, | | | | details must be kept and recorded with the register of |
| “trust”, “university”, “chamber of | | | | members. |
| commerce” and “chartered”, as well as | | | | 4. Complete and lodge the application form: |
| words suggesting a misleading connection with | | | | Once the relevant consents have been obtained then |
| Government, the “Royal Family” or the Sydney | | | | you must complete and lodge ASIC form 201 – |
| 2000 Olympics. The aim of such restrictions is to | | | | Application for registration as a company together with |
| ensure that a company’s name does not mislead | | | | the prescribed fee, currently $720. Do not lodge the |
| as to the company’s activity or purpose. ASIC | | | | consents with ASIC. These must be kept with the |
| may also refuse to register names which are | | | | company’s records. The completed ASIC form 201 |
| offensive or suggestive of illegal activity. | | | | can be lodged in person at any ASIC Business Centre. |
| Reserve a company name: | | | | The ASIC form will require the applicant to state: |
| If you thought of a name last year but have only just | | | | • The proposed company name, or ACN number; |
| gotten around to starting the company, for whatever | | | | • The class and type of company; |
| reason, you probably didn’t realise that you can | | | | • The registered office details; |
| ensure that the name cannot be taken by another | | | | • The principal business office details; |
| company until you are ready to register it. To reserve | | | | • Director(s) details; |
| the name, you simply complete and lodge ASIC form | | | | • Secretary details; |
| 410 – Application for reservation of a name, with | | | | • Member(s) details; and |
| the prescribed fee (currently $35). If the application is | | | | • Details of shares. |
| approved, the name will be reserved for a period of | | | | The completed application form must be signed by the |
| two months. The application will approve unless the | | | | applicant who can be either an individual or company. |
| name is: | | | | Australian Company Number (ACN): |
| • Identical to a name reserved or registered for | | | | When a company is registered with ASIC it obtains an |
| another corporation or a name already listed on the | | | | Australian Company Number (or ACN). An ACN is a |
| national business names register; or | | | | unique 9 digit number allocated by ASIC to each |
| • Unsuitable for the reasons above. | | | | company. |
| Using your ACN as a company name: If you prefer no | | | | A proprietary company must also have the words |
| name, you can nominate the CAN as the name | | | | “Pty Limited” as part of its name, which can be |
| For example, your company name would be known | | | | abbreviated to “Pty Ltd”. A proprietary company |
| as “000 111 222 Pty Limited”. In this case you do | | | | must legibly display its company name and its ACN on: |
| not need to complete or lodge form 410 or nominate a | | | | • Every public document issued, signed, or published |
| name on form 201, simply tick the appropriate boxes | | | | by or on behalf of the company; |
| on the form 201 as required. | | | | • Every negotiable instruments (for example |
| 2, Choose a “constitution” or “replaceable | | | | cheques and promissory notes) signed by or on behalf |
| rules” | | | | of the company; |
| A company’s internal management may be | | | | • All documents lodged with ASIC; and |
| governed by either: | | | | • The common seal (if the company has a |
| • Provisions contained in the Corporations Law | | | | common seal). |
| known as “Replaceable Rules”; | | | | Registered office: |
| • Or a Constitution (formerly Articles of | | | | As stated above, each company must have a |
| Association); | | | | registered office in Australia where communications |
| • Or a combination of both. | | | | can be sent and where the secretary or its agent is |
| Companies are not required to have a separate | | | | present. On registration the address specified in the |
| constitution (formerly Articles of Association). | | | | application becomes the address of the registered |
| Companies can simply take advantage of the | | | | office. A company must usually keep its company |
| replaceable rules contained in the Corporations Law as | | | | register at the registered office. |
| a means of internal governance. A company will only | | | | Minutes of meeting: |
| need a constitution if it wants to displace, modify or | | | | A company resolution is a formal expression of a |
| add to replaceable rules. For the sake of simplicity in | | | | decision made in a meeting of company directors or |
| the future, Net Lawman recommends you do draw up | | | | members. Resolutions and company meetings are |
| a constitution as it ensures your company is governed | | | | recorded in the company register in the Minutes of |
| by rules chosen by you and the shareholders and may | | | | Meeting. |
| save time in the future should you need to change the | | | | Share register: |
| rules swiftly for whatever reason. | | | | A company share register must be kept at the |
| Note: replaceable rules do not apply to a proprietary | | | | registered office. A share register must be kept for |
| company while the same person is both its sole | | | | each shareholder of the company. |