What is the main source of law authorising this entity form?

The primary legislation governing corporations is the Corporations Act 2001 (Cth) (Corporations Act)

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

A Pty Ltd Company has legal personality

(Maximum) period of existence

There is no maximum period of existence.

Governing document(s)

A Pty Ltd Company is governed by the Corporations Act. A Pty Ltd Company may (but is not obliged) to adopt a constitution which can override certain (but not all) provisions in the Corporations Act.

Liability of incorporators / shareholders

Shareholders are not liable for the debts and liabilities of a Pty Ltd Company and are only liable for the paid up capital amount of their shares.

(Governing) bodies

The main governing body for Australian companies is the Australian Securities and Investments Commission (ASIC).

Other particularities

A Pty Ltd Company cannot have more than 50 non-employee shareholders, subject to some limited exceptions in respect of crowd sourced funding.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

A Pty Ltd Company can acquire assets from, or an interest in, foreign entities.

Foreign entities can acquire the business assets, or shares in, a Pty Ltd Company. Such acquisition may be subject to the approval from the Foreign Investment Review Board, depending on the nature and scale of the business.

Can this type of entity be publicly listed or held?

No. A Pty Ltd Company would need to be converted into a public company to be listed or publicly held.

A Pty Ltd Company cannot have more than 50 non-employee shareholders, subject to some limited exceptions in respect of crowd sourced funding.

Can this type of entity be used for a non-profit or charitable organization?

Yes, although it would need to be registered as a charity and is not a common structure for this type of activity.

An incorporated association or a company limited by guarantee is a more usual structure for a nonprofit or charity.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

A Pty Ltd Company may, but is not obliged to, adopt a constitution. If no constitution is adopted, the Pty Ltd Company will be governed by the replaceable rules in the Corporations Act.

Involvement of notary, company register, governmental authorities

A Pty Ltd Company must be registered with ASIC. It must register with the Australian Taxation Office and may be required to register for GST depending on the nature and scale of the business.

Ordinarily a lawyer or accountant would assist with the incorporation of the Pty Ltd Company, but this is not a requirement.

Timing (estimate)

There are no waiting periods and once all of the relevant information has been collected (name of the company, director and shareholder details), a Pty Ltd Company can be incorporated within one business day. Directors who do not already hold a director identification number will need to apply for one prior to appointment, which involves the provision of certain identification documents, and collating these documents can cause small delays to incorporation of a new Pty. Ltd Company

Main costs, including registration and similar fees (excluding legal fees)

The main fees incurred are the fees of the professional service firm engaged to assist with the incorporation. The lodgement fees with ASIC are not substantial (under AU$1,000).

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

A description of the anticipated business or purpose is not required unless the Pty Ltd Company is being incorporated for a special purpose (eg for a charitable purpose)..

Minimum number of incorporators / shareholders and residency requirements

A Pty Ltd Company must have at least 1 shareholder. There are no residency requirements for shareholders.

Minimum number of directors (or other applicable officers) and residency requirements

A Pty Ltd Company must have at least 1 director who ordinarily resides in Australia.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

A Pty Ltd Company must issue at least 1 share, and the minimum capital required is $0.01.

Commonly a Pty Ltd Company that is a wholly owned subsidiary will have 1 ordinary share issued with a paid up capital amount of $1.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

A Pty Ltd Company must have at least 1 director who ordinarily resides in Australia.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A trading Pty Ltd Company needs a Tax File Number and Australian Business Number which can be obtained by application to the Australian Taxation Office and the Australian Business Register respectively.

Depending on the nature and scale of the business undertaken, the Pty Ltd Company may also be required to register for GST.

What is the title of the applicable company registry?

The Australian Securities and Investments Commission maintains a publicly available database that contains certain details of a Pty Ltd Company.

What types of information must be filed at the (company) register, and which of them will it be publicly available?

The following information is publicly available:

• Registered office;
• Principal place of business;
• Current and Past Directors and Secretaries (address, place of birth, date of birth);
• Current and Past Shareholders
• Share capital;
• Certain financial reports;
• Certain filings made by the Pty Ltd Company;
• The current status of the Pty Ltd Company (registered, in administration, in liquidation etc).

Liens and encumbrances are registered on a separate publicly available database, the Personal Property Securities Register.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The Directors of a Pty Ltd Company are responsible for its management.

The Directors are subject to fiduciary duties, obligations under Corporations Act and must act in the best interests of the Pty Ltd Company.

The Directors may delegate certain functions to committees or employees (e.g., a CEO), but remain responsible for the management and operations of the Pty Ltd Company.

How are the members of the executive body appointed, dismissed and replaced?

The Shareholders can appoint and remove Directors.

The Constitution may provide for the Directors to have the power to appoint further Directors.

Directors may resign at any time, although there must always be one Director.

Is it possible to appoint corporate directors or must all directors be natural persons?

No. All Directors must be natural people.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

There is no distinction between executive and non-executive directors under the Corporations Act.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The owners of a Pty Ltd Company are the Shareholders or Members.

Shareholders (in that capacity) do not have an active role in the management of the Pty Ltd Company but do have the ability to appoint and remove directors.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Most shareholder decisions are by majority vote. Certain actions under the Corporations Act (for example, changing the name of the Pty Ltd Company) require a special resolution passed by a 75% majority.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Large proprietary and foreign owned companies may be subject to additional financial reporting regimes.

Certain industries also impose additional requirements on the Pty Ltd Company, for example, a financial services business will be required to obtain an Australian Financial Services Licence and comply with the obligations imposed on a licensee.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

A Pty Ltd Company must file an annual tax return with the Australian Taxation Office.

Business Activity Statements (which report on GST and certain other withholding taxes) also need to be filed and are typically filed monthly or quarterly.

Is the entity permitted to determine its own financial year?

Generally, a Pty Ltd Company will follow the Australian financial year (ending 30 June), although a foreign owned company can apply to follow the financial year of its parent company.

Is the entity subject to any statutory (external) auditor obligations?

Generally, no, although depending on the nature and scale of the Pty Ltd Company, and whether it is locally or foreign owned, entity, an audit or lodgement with the Australian Securities and Investment Commission may be required.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

A Public Officer will need to be nominated as the main point of contact with the Australian Taxation Office. The Public Officer is usually the Secretary and may also be a Director.

What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Different classes of shares are possible, including preference shares, redeemable shares, non-voting shares, and shares that do not carry any rights to dividends.

What documentation is required for the transfer of ownership interests?

A formal record of the transfer should be provided.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The transfer will need to be registered with ASIC.

If a constitution has been adopted or the shareholders have agreed, there may be pre-emptive rights that need to be complied with.

Are there any applicable stamp duties imposed when transferring ownership interests?

Duty is not usually levied on share transfers unless a Pty Ltd Company owns land. Duty may depend on the proportion of shares being transferred, the value of land (over a certain value), and the threshold and amount of duty, which varies from state to state.

How are shares issued? (including information on payment obligations, registration requirements)

The Pty Ltd Company can issue further shares, subject to the requirements of the Corporations Act, and any restriction in its constitution (if one is adopted).

ASIC must be notified of an issue of shares.

Further information on equity contributions

Shares can be purchased for non-cash contributions or can be partly paid.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Capital reductions are governed by the Corporations Act and must be approved by the shareholders.

Once shares are re-purchased by the Pty Ltd Company, they must be cancelled.

ASIC needs to be notified of any capital reduction.

Any requirements with respect to distributions to shareholders?

The directors of a Pty Ltd Company may declare a dividend to a class of shareholders if the company's assets exceed its liabilities, the dividend is fair and reasonable to the shareholders as a whole, and the payment of the dividend does not affect the ability of the company to pay its creditors.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes. The shareholders can enter into a shareholders’ agreement to further regulate their relationship.

 

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The annual fees for maintaining the Pty Ltd Company's registration are not substantial and are less than the cost of incorporation. (currently under AU$400 per annum)

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

Most Pty Ltd Companies are taxed at a flat rate of 30%.

Smaller Pty Ltd Companies (“base rate entities”) are taxed at a lower rate, being 25% of its assessable income. Base rate entities must have an aggregated turnover of AUD$50M or less, with 80% or less of its income being passive income.

 

Summary of any specific matters, e.g. recent or prospective major legal developments

No major legal developments are expected for the remainder of 2022 or early 2023.