Business law is a complex thing. Anyone wanting to create a corporation would first need to understand the legal regulations involved. They’d also have to be compliant in the way they operated and managed the company from day one.
If a corporate businessman came from England to Australia, they would quickly identify the similarities in the legislation. Perhaps you are currently in the process of setting up a corporation right now and want to learn more. Let’s go through some basic principles together right now.
The Key Foundation
Everything you do will revolve around one national statute: The Corporations Act 2001. Its requirements are regulated by the Australian Securities and Investments Commission, or ASIC. When your corporation is formed, you’ll have to become ASIC registered.
Whilst creating a business is not easy, people don’t need to do it alone: they can gain vital information from specialist websites. The professionals behind alvinlegal.com.au explain that people are actively looking for articles on how to raise money for their startups or to learn employment law. Some of these sites form a central hub for both blogs and business solutions. People are able to subscribe for regular updates too.
Forming The Company
You would need to register your company name and ACN. If it’s a limited company this would need to form part of the title. Any trademark would also need registering, as well as the business domain of your website. Companies become corporations either through legislation or by charter prescription.
You will need an official company address for all correspondence. If you are using someone else’s premises for your business, be sure to gain their permission first. Two more things will need to be considered:
- Do you wish to be a public company or a proprietary one?
- What will be the shareholders’ liability?
If you have a German company (for example) that is extending into Australia, you will need to register the business as a foreign entity. A Certificate of Incorporation will then be produced.
Whether you have one employee or 100, there must be a shared capital. The good news is there is there’s no limit to the number of shares you can provide.
If a person owns a share, that gives them the power to vote in directorship elections or when a poll is taken during a meeting (eg regarding proposed changes to the company’s constitution). Shareholders can also appoint temporary directors, or appoint additional ones.
The Directors’ Task
Directors must be aged 18 or over. Their nationality is not an issue, although it’s expected they will be living in Australia. Public companies need to have at least three directors, while proprietary companies need a minimum of one. Whilst directors are managers who can choose their own pay, the tax authorities assess their finances in the same way as for company employees.
Under corporate governance, directors have a duty of loyalty and care for their company. There are fair trading laws that must be followed, and specific conduct codes. It’s the director’s role to consider the needs of the shareholders at all times. They basically want value for money on their investment. Sometimes business deals occur where a director discovers they have a conflict of interest. This means they are like a ‘double agent,’ having connections to both parties. One example would be where the corporation is considering employing a cleaning company, and the director has shares in it or a trustee role. Should such a situation occur, it is vital that the director discloses this information. Any breach in integrity would be classed as a criminal act. This brings us to:
Honesty In Business
It’s the task of the Board to adhere to the company’s compliance requirements. This would result in the regular production of reports and financial statements. External auditors are required to visit corporations and to go through all these documents. They are also able to access any additional information deemed relevant to the task.
The Constitutional Rules
If a director is no longer viewed as suitable for their role, a majority vote can remove them. Similar powers belong to the regulator (ASIC). The rules regarding this removal differ between public and private companies. It’s the power of the Board to choose a CEO or to have them removed.
There are other aspects for corporations that we’ve not discussed, such as takeover policies. Companies of any type also need to cover such things as registering intellectual property rights, importing and exporting, and health and safety. Whilst the laws can be demanding, they are ultimately designed to benefit organizations and to protect the public.
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