A company is a separate legal entity that can hold assets in its own name and is liable for its obligations. The two main types of company in Australia are proprietary and public companies.
A public company may be listed on the Australian Securities Exchange. A proprietary company is limited to 50 non-employee shareholders and cannot engage in fundraising activities in Australia. However, in terms of regulations, it can be simpler and cheaper to administer a proprietary company.
A company must have a registered office in Australia and Australian resident directors (two for public companies and one for proprietary companies). A public company must also have an Australian resident company secretary; however, this is optional for proprietary companies.
There are no residency restrictions on shareholders and no general minimum capital requirements.
A company is managed by its directors but owned by its shareholders (commonly called ‘members’). Australian law and practice contains a principle of separation of responsibilities between those of the directors and the shareholders.
Directors oversee the management of the company’s day-to-day business and affairs. They also have common law and statutory obligations, such as a duty to act with care and diligence. Directors who fail to perform these duties can be found guilty of an offence. These duties may continue even after a company is deregistered.
Generally speaking the rights of the shareholders at a general meeting are to remove and appoint the directors and to deal with specific matters such as changes to the company's constitution, its capital structure and winding up.
The main duty of directors is to act in the best interests of the company. However, if the company is insolvent, or risks insolvency, they also have a duty to the company’s creditors. In such circumstances, directors must prevent the company from trading and incurring further debt. Directors who contravene the insolvent trading provisions of the Corporations Act can face civil and criminal charges.
There is currently no requirement under Australian law pursuant to which workforce representatives must be appointed as directors.
Australian companies are governed by the Corporations Act, their constituent documents and common law.
With limited exceptions, a company may be required under the Corporations Act to prepare and file annual financial statements with the Australian Securities and Investments Commission (ASIC). These statements must be prepared in accordance with the Corporations Act and Australian Accounting Standards.