Insights / August 6th, 2020

Establishing a corporate presence in Australia (Part 1) – structures and directors' duties

We have seen an increase in overseas clients establishing operations in Australia, to focus on a range of Australian markets and also as a base for operations in our region. In this note, we answer some of our clients’ FAQs. In a second note, we will address some additional matters.

Most industries have their own regulatory compliance requirements but the following points summarise our answers to FAQs about corporate structures.

  • A privately owned (proprietary) company limited by shares is the most commonly adopted corporate structure for SME trading businesses. A proprietary limited company will typically be identified by the abbreviated designation ‘Pty Ltd’.

  • Other business structures, including trading trusts, are possible and may be preferred in particular circumstances but a trading company is often the most suitable entity.

  • The Australian Securities and Investments Commission (“ASIC”) is the Australian regulatory authority that oversees company incorporation and regulation.

  • While not strictly necessary, almost all companies will be incorporated with a constitution that sets out key governance provisions.

  • The company will need to have a registered office in Australia, which may or may not be the company’s principal place of business. This is the official company address for services of notices and some other compliance requirements.

  • The company may be incorporated with minimal issued capital and it need not have any Australian resident shareholders. A Pty Ltd company must have at least 1 shareholder and cannot have more than 50 non-employee shareholders plus additional employee shareholders.

  • A Pty Ltd company is not permitted to raise funds generally from the public. If a company wants to do that and/or intends to have more than 50 shareholders, it will need to be a public company limited by shares.

  • A public company limited by shares is similar to a proprietary company but has a range of increased reporting and other statutory obligations.

  • A public company need not be listed on a securities exchange but for a company to be listed, it must be public. A public company will frequently be identified by the abbreviated designation ‘Ltd’ (without the ‘Pty’).

  • The Pty Ltd company must have at least one director who is ordinarily resident in Australia. The company may have other directors who are not Australian residents. Directors must be natural persons at least 18 years of age.

  • Directors of Australian companies have a range of statutory and general law duties. Key duties include the duty to act in the best interests of the company and to exercise reasonable skill and judgement in the conduct of the company’s affairs.

  • In certain circumstances, directors may become personally liable for the debts of the company. For example, personal liability may attach to a director where the director permits a company to incur debts it doesn’t repay when the company is insolvent or in cases of unmet liabilities of the company to the Australian Taxation Office (“ATO”) and a range of other legislated liabilities.

In our next note we will discuss foreign investment requirements, corporate tax in Australia and employment agreements.

Please contact us if you wish to discuss the requirements for establishing operations in Australia. Our team can provide you with advice in relation to the most appropriate structure for your business.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.

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