Given its strong economy, robust banking system and quality of life, it’s no surprise that we receive many enquiries from overseas regarding the establishment of a subsidiary company in Australia. Generally, most foreign companies seeking to conduct business in Australia incorporate a Proprietary Company.
- use the suffix Pty Ltd or have Proprietary Limited in their company name
- Provide limited liability to shareholders, meaning that the liability falling upon shareholders in the event of a wind-up is equivalent to the unpaid amount (if any) on their shares
- Must have at least one director who is a resident of Australia, and a resident company secretary if any secretary is appointed.
- Must have a Registered Office located in Australia
The following restrictions apply to proprietary companies:
- Proprietary Companies generally cannot engage in fundraising activities that would require the lodgement of a prospectus (i.e. seeking to raise funds from the public). They can, however, raise money through private sales of equity.
- Proprietary Companies cannot have more than 50 non-employee shareholders
Large vs. Small Proprietary Companies
A Proprietary Company may be classified as a ‘large proprietary company’ or a ‘small proprietary company’, depending on whether they achieve two out of the following three criteria:
- the consolidated revenue for the financial year of the company and any entities it controls is $25m or more;
- the value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $12.5m or more; or
- the company and any entities it controls have 50 or more employees at the end of the financial year.
If a company does not satisfy at least two of the above criteria, it is considered a small proprietary company.
Process of Incorporation
The process involved in incorporating a proprietary company is as follows:
1. Choose an available company name
A register of Australian company and business names is maintained by the corporate regulator, Australian Securities and Investments Commission (ASIC). A simple name search can be undertaken on their website at http://www.asic.gov.au/.
2. Complete ASIC Form 201 Application for registration as an Australian company
In order to complete the form, the following information must be provided:
- Details of directors and secretaries including full name, address, date of birth and place of birth. You must have consent from all officers before incorporating the company.
- Details of the registered office in Australia
- Details of the shareholders and share structure
- Details of holding companies if applicable
There is a fee of $444 payable to ASIC at the time this blog was written.
Post Incorporation tasks
Once the company is incorporated, there are various other matters that need to be undertaken, such as:
- Apply for an ABN and Tax File Number with the Australian Taxation Office (ATO) http://www.ato.gov.au/Business/Australian-business-number/
- Maintain various statutory company registers
- Nominate a public officer with the ATO
- Open a bank account (not required but most companies need this!)
All Australian companies are required to keep financial records and various registers of their financial and administrative transactions.
If the company is considered a Large Proprietary Company (see above) it must also prepare annual financial reports which are:
- prepared in accordance with Chapter 2M of the Corporations Act (2001)
- lodged with ASIC within 4 months of the financial year end
- sent to members within 4 months of the financial year end.
Proprietary Companies that are wholly owned by foreign subsidiaries may also be required to fulfil these reporting requirements unless relief is granted by ASIC.
Companies must also notify ASIC of the following changes:
- company name (within 14 days of the change)
- company details e.g. registered office or principal place of business (within 28 days of the change)
- company constitution (within 28 days of the change)
- directors details: name, address, new appointment or resignations (within 28 days of the change)
- share structure or shareholder details (such notifications are to be made within 28 days of the change)
Please note that this is a very basic list of the requirements of setting up a proprietary company in Australia and we recommend that professional assistance be obtained. However, hopefully it has given you context of what is required.