Structuring Your Company in Australia A Guide for Business Owners

Structuring Your Company in Australia: A Guide for Business Owners

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Company Secretary

When embarking on the journey to register a company in Australia, comprehending the foundational requirements and the intricate regulatory framework is paramount. Properly structuring your company not only ensures compliance but also paves the way for smooth operations and minimizes risks. This article will help you get a very good begin for the duration of the pre-registration phase.

1. Shareholding Considerations

In Australia, a private company cannot have more than 50 non-employee shareholders. The number of non-employee shareholders will determine the classification — if it is greater than 50, then registration as a public company becomes required. Public companies are regulated differently and must release a lot of information to the general public.

The practice of issuing 12 shares upon registration is a convenient way to simplify the transfer of shares among shareholders. Large numbers of shares issued make it cumbersome and costly to shift share ownership from one shareholder to another.

By issuing 12 shares upon registration, a company can avoid the need to make frequent adjustments to its share capital when shares are transferred and save the company time and money.

But remember that there isn’t a universal answer for choosing how much should be set as equity when setting up your startup. The best share capital structure for your company will depend on your specific circumstances and business goals.

It’s best to consult with a financial or legal professional to help you determine your company’s initial dividend size and ensure your dividend structure aligns with your business goals.

2. Directorship Requirements

At least one director: Each organization registered within Australia should have no less than one director. The director of an organization is answerable for managing all issues identified with the organization and guarantees adherence to lawful necessities.

At least one of a company’s directors must ordinarily reside in Australia: At least one director of a company must be an Australian resident. Australian residency means that the director must ordinarily reside in Australia. This means that the director must spend more than half of their time in Australia each year.

A director must consent in writing to take on the role and responsibilities of a director: Before a company is registered, all directors must provide written consent to act in their capacity. The written consent shall be signed by the director in question and shall be supplied to ASIC.

At least 18 years of age: This is to make certain that directors have the legal capacity to contract and to make other important decisions on behalf of the company; However, these are the basics of directorship in Australia. Depending on the nature of business and industry, there could also be other specific needs. In many cases, there are even mandatory minimum director requirements (such as the need for at least one director who has specific qualifications (often a lawyer, accountant, or financial professional).

3. Directors’ Responsibilities and Duties

Directors of Australian companies shoulder a multitude of vital responsibilities and duties, each of which is carefully defined by the Corporations Act and the general law.

Acting in good faith: It signifies the highest degree of integrity and sincerity in every decision, action, and interaction a director engages in while discharging their duties.

Avoiding improper use of their position or company information: Directors shall not exploit their position or Company Information for their own interest, and/or for any third parties’ interest. Which is, among other things, insider trading of Company stock, and providing investment advice based on insider information about Company stock.

Always acting in the company’s best interest, ensuring no conflicts with personal interests: Boards need to act at all times as though it’s a direct benefit to the businesses and shareholders. This requires them to refrain from conflict, disclose any actual or potential conflicts to the board.

Exercising due diligence and care: Directors must exercise reasonable care and diligence in the performance of their duties.

Ensuring the company doesn’t trade if unable to pay its debts: The director is to take care that it doesn’t go bankrupt if insolvent. In theory, that means as debts fall, it can reduce them.

Assisting the liquidator during company wind-up by providing necessary records and reports: If the company goes into liquidation, directors are required to assist the liquidator by providing them with all necessary records and reports.

It is important that directors diligently understand and comply with these duties, as a breach of any of these duties may result in severe penalties such as criminal charges, imprisonment, or fines. This not only ensures compliance but also reflects the ethical obligations of the company.

4. About Company Secretary

The role of the company secretary in the organizational structure of a company in Australia can be clarified as follows.

While it is not obligatory to appoint a company secretary, such a designation can prove advantageous, particularly when a company is headed by a single director. A company secretary can handle all the company’s regulatory required tasks and ensure the company is in compliance with the requirements.

A company can appoint multiple secretaries, but having one is practical. It might be advisable for a company to have one secretary, if not then many of them can be appointed. Usually, it’s better to have one secretary instead of several at an organization. For the case that the company wants more than one secretary, is needed for at least one of them must be a person from Australia. This requirement means that at least one director (key officer) of the company must be based in Australia for the operation of the company under Australian law.

Written Consent: Similarly, individuals appointed as secretaries must sign off in a manner specified in writing prior to taking up their position. This written consent serves as formality and confirmation of a person to be appointed and assume the responsibilities of the company secretary.

Deciding who will take on the duties of a company secretary can be an important one — this choice could make all the difference when considering how you operate as a business. Although not a statutory role, a company secretary can provide an essential support function in managing the company’s administration and ensuring compliance.

5. Obligations of Company Secretary

The obligations of a company secretary as stipulated by the Corporations Act, encompass the following responsibilities.

Notification to ASIC about Changes in Director and Secretary Details: The company secretary is legally required to ensure that any changes in the details of directors and secretaries are promptly communicated to the Australian Securities and Investments Commission (ASIC).

Prompt Updating of ASIC Regarding Modifications in the Register of Members: The company secretary is tasked with ensuring that any alterations or updates to the register of members are promptly reported to ASIC.

Compliance with Requests such as Extract of Particulars: The company secretary is obligated to adhere to requests from ASIC, which may include providing extracts of specific company particulars or information.

6. Appointing a Public Officer

When choosing Public Officer Australia, here are some significant factors to look into.

Mandatory Appointment: It is a statutory requirement for every company in Australia to appoint a public officer.

Role Clarification: Australian Taxation Office (ATO) website lists down the roles and responsibilities of the public officer and this resource provides comprehensive guidance on the duties associated with the position.

Timely Appointment: The appointment of a public officer must occur within three months of the company commencing its business activities or generating income in Australia.

Penalties for Delay: Failure to make this appointment within the stipulated three-month period can lead to daily fines, highlighting the importance of timely compliance.

Responsibility for Tax Compliance: The public officer bears the significant responsibility of ensuring the company’s compliance with the Income Tax Assessment Act 1936. In cases of non-compliance, both the company and the appointed public officer are held liable emphasizing the need for diligent and knowledgeable oversight.

Summary

Whether you are making decisions related to share distribution, appointing directors and secretaries, or ensuring compliance with their respective obligations, one thing remains paramount: staying well-informed.

Complying with legal requirements and fulfilling all obligations will not only ensure compliance, but also lay the foundation for long term, sustainable growth of your company in Australia’s business ecosystem.

Schedule a call with FastLane Group or visit our website to see how we can help your business in Australia.

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