How to incorporate an Australian Company – checked by our Law Firm

• Company Registration

• $787 includes GST

• Includes ASIC fees

• Start Building
• Checklist

Register your Australian company on our law firm’s website

We check your new Australian Pty Ltd company registration. This is before we incorporate it with ASIC.

Your new company and constitution are structured to perform many jobs. These include:

1. corporate trustee of a family trust
2. corporate trustee of a unit trust
3. corporate trustee of Self-Managed Superannuation Fund (special purpose company)
4. corporate trustee of a Custodian Bare trust when an SMSF borrows money
5. bare trustee: Acknowledgement of Trust – ‘AFTER the Trustee buys’
6. bare trustee: Declaration of Trust BEFORE you buy – ‘secretly buy’
7. bare trustee: Bare Trust Deed – ‘hide assets you own’
8. crowd-sourced funding vehicle
9. vehicle to operate a business in its own right (rather than through a trust)
10. ‘bucket company’ for your Family Trust (see below)

At no additional charge, we talk to ASIC on your behalf. This is to make sure your company is registered correctly. Our law firm provides a complete company register. It contains all minutes and our constitution. The documents are stored online for you to access at any time.

How to choose a name for your new Australian company

As you build your Australian company on our website, check if your preferred company name is available.

Restricted words and expressions in an Australian company:

‘bank’
‘trust’
‘royal’
‘incorporated’

You cannot use words that could mislead people about a company’s activities. This includes links to the Government, the Royal Family, or ex-service groups.

ASIC also refuses offensive and illegal names.

Australian Company Name Abbreviations:

and: &

Australian Business Number: ABN

Company: Co, Coy

Proprietary: Pty

Limited: Ltd

Australian: Aust

Proprietary Limited: Pty Ltd

Company Constitution vs Australian replaceable rules

Australian companies are governed by either:

* a constitution (recommended), or
* replaceable rules

Replaceable rules (from the Corporations Act 2001) provide a basic set of rules for your company. They are not good. Few accountants, lawyers and advisers recommend them.

Replaceable rules are less than the bare minimum. There are many additional powers that a company should have. These are only found in a constitution.

Replaceable rules change at the whim of the current government. While the changes may benefit ‘society’, they may not be in the best interests of shareholders. In contrast, shareholders can amend constitutions anytime.

Your new Company Constitution contains:

* Adj Professor, Dr Brett Davies’ Doctorate was on business succession planning, our pre-emptive rights are cutting edge
* ‘tag along’ requirement forcing minority shareholders to also sell their shares together with majority shareholders
* accountant friendly, GAAP compliant valuation powers
* profit distributions, even when there is no ‘profit’ for ATO purposes
* over 30 different classes of shares – see the sample. And you can add to the classes of shares at any time
* allowing Directors and shareholders to use Zoom and other online facilities
* built-in Division 7A Loan Deeds

“Pty Ltd” is an abbreviation for “Proprietary Limited”

• ‘Proprietary‘ means the company is privately held.
• ‘Limited‘ means the liability of the shareholders to pay the debts of the company is limited. This is called ‘limited liability‘. See here for asset protection.

Minimum requirements for an Australian Pty Ltd company:

• at least one director/secretary living in Australia
• a physical Australian address for the registered office
• at least one shareholder (but no more than 50 non-employee shareholders0

Pty Ltd companies are the vast majority of companies registered in Australia. Over 99% of companies incorporated in Australia are Pty Ltd. (Less common is “Ltd” and “No Liability”.)

Seven advantages of using a law firm to incorporate your company

The 7 advantages of using Legal Consolidated:

1. 94% of incorporations happen within 25 minutes of you building the company online
2. lawyers personally vet the details before submitting to ASIC
3. when required, we contact ASIC to confirm your company name
4. what if your company name is unavailable or challenged by ASIC? We contact you and help you find one that is available
5. you receive a secure, personalised email containing
   • Certificate of Incorporation
   • Company Constitution
   • All minutes
   • Letter on our law firm’s letterhead
6. as always, our hints and training videos guide you. The law firm is available for legal advice on how to build your document
7. a constitution is a deed. Only a law firm can legally prepare deeds.

Australian company tax rates

A company pays tax at a fixed rate. (In contrast, a human being pays tax at different marginal tax rates. The more you earn the higher the tax rate.) Your company (flat) tax rate depends on whether the company is a base rate entity.

From 2021 there is a 5% difference.

For example, in 2018/19, a company’s base rate entity and use the Low Rate if its aggregated turnover is less than $50m and 80% or less of its assessable income is base rate passive income. Passive income includes such things as dividends and rent.

The maximum rate that a company can use to frank dividends is its corporate tax rate for imputation purposes. It is worked out based on the company’s position in the prior year. It is either the current year Low Rate or the High Rate based on the prior year’s levels of aggregated turnover, base rate passive income and assessable income.

If the company was set up in the current year then the maximum franking rate is the Low Rate for the current year.

Constitution allows for digital signatures

Q: When purchasing a new company on your website, does the constitution by default include a clause allowing for digital signatures for Directors? I know you do not like digital signatures!

A: You are correct, I do not like digital signatures. But the Company Constitution is fully updated to allow for all legislation of digital signatures and over Internet meetings, such as:

• Zoom
• Microsoft Teams
• Webex Meetings
• GoToMeeting
• Google Hangouts Meet
• BlueJeans Meetings
• join.me
• Cisco Jabber
• TeamViewer
• Adobe Connect

Can an Australian company, itself, give a Power of Attorney?

Yes. It is called a Corporate Power of Attorney. Legal Consolidated Constitutions allow for Company POAs.

Is my company a ‘bucket company’ for my Family Trust?

When you build a company, any company, it becomes a beneficiary under a Family Trust prepared by Legal Consolidated or Brett Davies Lawyers. This is the case for most Australian Family Trusts, as well.

You could build the company many years after you built the Family Trust deed. It does not matter. The compnay automatically becomes a beneficiary under your family trust. You are then able to use it as a ‘bucket’ company if you so wish.

Similarly, if get married and have children then they automatically become beneficiaries under the Family Trust.

This is because the Family Trust has ‘classes’ of ‘beneficiaries’. And these classes are ‘open’.

The definition of beneficiaries generally includes ‘my spouse, children, grandchildren, great grandchildren and any company I have an interest in, from time to time‘.

So generally any company you have an interest in is also a beneficiary under your Family Trust.

Interestingly, if you have a share in say, Rio Tinto, and if Rio Tinto has 300,000 beneficiaries, then all 300,000 beneficiaries are also beneficiaries of your family trust!

So pretty much any company you have an interest in is a beneficiary of your family trust. Obviously, a “Special Purpose Company” (while also a beneficiary of your family trust) can not be used as a bucket company. This is because a Special Purpose Company can only do one job. This is to be a trustee of your Self-Managed Superannuation Fund.

Why is it called a ‘bucket company’ in a family trust?

Your Family Trust distributes to humans beneficiaries (mum, dad, children) first. This is to use up their low marginal tax rates. When there is no one left on low marginally tax rates then the family trust pours the rest of the income into the ‘bucket’ company. The company gets whatever income is left to be distributed.

Unlike humans, companies pay a fixed percentage rate of tax. Whether the company gets $10,000 or $100,000 in trust income it pays the same percentage tax rate.

However, bucket companies are rarely used, these days. This is because of the draconian and cruel Division 7A.

Different types of Directors in a Pty Ltd

Over 99% of Pty Ltd companies only have one director. This is for asset protection. But you can have more. There are distinctions in the types of directors. These are all ‘nicknames’ for different roles a director may hold. You can mix and match these powers as the shareholders see fit:

• Managing Director – appointed, by the directors. The “MD” may take all of the board’s power
• Chair of directors – exercises procedural control at the meetings and signs the minutes
• Nominee director – represents the interests of a particular group. For example, employees may be entitled, pursuant to the company constitution, to elect a director
• Alternate director – fills in during a director’s absence
• Executive director – a full-time employee of the company
• Non-executive director – not involved in full-time management of the company. Not an employee. An outsider is free of any business or other relationship with the company. Considered ‘independent’. Often these are experts. They provide specific expertise for certain areas of the company’s business
• Governing director – see below

The above expressions are descriptive. They are not strict legal terms. Because you have a Legal Consolidated Constitution you can change and amend the powers of the directors.

Maintaining a company register

A Pty Ltd company in Australia requires a company register. All Australian companies keep some form of written financial records that:

• record and explain the financial position and performance
• enable accurate financial statements to be prepared

Requirements for company ‘books’ and registers

Section 9 Corporations Act defines ‘books’ to include:

• registers
• records of information
• financial reports
• financial records
• other documents

All Australian Pty Ltd companies maintain ‘books’. The common expression is the ‘company secretary file’. The Corporations Act sets out how this is maintained. It also states who is provided access to the information in the company secretary file.

You suffer penalties if you fail to maintain the company’s books, destroy or falsify them. For example, false minutes carry a fine and two years in jail.

Mandatory company books and their requirements are:

• The Constitution – Is available for inspection at the company’s registered office. Access is provided (at no charge) to ASIC, directors, the auditor, liquidators, receivers, administrators, debenture holders and anyone authorised by ASIC and (for a fee) to shareholders (Authorised Persons).
• Financial Records – Are kept for seven years. See section 286. They are also available for inspection. Keep them at the company’s registered office. Otherwise, you need to go out of your way to let ASIC know where they are kept. You provide access to the finances to the Authorised Persons for a fee. However, members see the finances for free.

  • These financial records can be electronic. But they must be convertible into hard copy. You must be able to print them.

  • Even if the financial records are held by your accountant, you, as a company officeholder, are still responsible for providing copies to auditors or anyone entitled to inspect your records.

• Minute book of Directors’ Meeting – Minutes are recorded in the Directors’ minute book. This is within one month of the meeting. These are available for inspection at the registered office and principal place of business. The Authorised Person, other than members, access Directors’ Minutes.
• Minute book of Members’ Meetings – As with Directors’ meetings minutes are recorded within one month of the members’ meeting. They are available for inspection at the registered office, principal place of business or elsewhere approved by ASIC. The Authorised Person access the shareholders meeting minutes.
• Register of Members – Section 169 Corporations Act requires an up to date register of all shareholders. This is for 7 years. And showing the changes over that 7 years of incoming and outgoing members. The register is kept in Australia. This is at either the registered office, principal place of business or at an ASIC approved share registry. It is available for inspection. Access to these documents is provided to both the Authorised Persons and the general public for a fee. This Register of Members includes:
  • names
  • addresses
  • share certificate number
  • amount paid for the shares
  • number of shares held
• Debenture holders and option holders – only if they exist these interests are also recorded.

Can an Australian Company Secretary file be held electronic?

Section 1306 Corporations Act 2001 permits companies to prepare and store their ‘books’. This includes registers and minutes, in a ‘mechanical, electronic and other device’.

But, the data stored in the device must be able to be reproduced ‘at any time’ in a written form. You must be able to print it out.

Also, Pty Ltd companies take reasonable precautions to protect its records against damage and tampering.

A company is also obliged to keep written financial records that correctly record and explain the company’s activities, financial position and performance. See section 286 Corporations Act 2001.

These records are kept for seven years. Section 288 allows financial records to be kept electronically. But, again, this is so long as they can be converted into a hard copy on demand.

Australian company Minutes require a wet signature

Electronic signatures are recognised in Australian law under the Electronic Transactions Act 1999 (Cth). States adopt similar rules.

But these provisions do not apply to the Corporations Act 2001. Therefore, minutes are signed in hard copy before electronic storage.

And in any event, Legal Consolidated, is not an advocate of electronic signatures.

Governing Director in an Australian Pty Ltd company

Q: I want to appoint a Governing Director. This is so they cannot be removed. They are on the Board until they die, become of unsound mind or resign.

The powers of the Governing Director are:

• Appoint new Directors and remove them
• Solely call a Shareholder meeting
• Had final approval on any discussions past at Directors’ meetings

A: Also, a Governing director has:

• life tenure; and
• control of the board for life. This is not the case for public companies.

Shareholders Agreement for your new Australian company

After your company is incorporated think about a Shareholders Agreement. This is if you have more than just you and your spouse control the Pty Ltd company. Shareholders agreements are in addition to the constitution. It between the members. It governs share ownership and transfers, dividend policies and management roles. They override the constitution.

Build a Shareholders Agreement. And in the Minutes have the shareholders unanimously agree to the powers of the Governing director.

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Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm

National:   1800 141 612
Mobile:      0477 796 959
Email:       [email protected]

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