Company Law Review Act 1998 (Cth)
Company Law Review Act 1998
Act No. 61 of 1998 as amended
Consolidated as in force on 16 September 1999
(includes amendments up to Act No. 63 of 1998)
Prepared by the Office of Legislative Drafting,
Attorney-General’s Department, Canberra
Contents
1 Short title etc. 1
2 Commencement 1
3 Schedules 2
Schedule 1—Main amendments of the Corporations Law 3
Part 1.5—Small business guide 3
4 Continuing obligations after the company is set up 11
5 Company directors and company secretaries 14
6 Shares and shareholders 16
7 Signing company documents 18
8 Funding the company’s operations 19
9 Returns to shareholders 19
10 Annual financial reports and audit 20
11 Disagreements within the company 22
12 Companies in financial trouble 23
Chapter 2A—Registering a company 24
Part 2A.1—What companies can be registered 24
112 Types of companies 24
113 Proprietary companies 26
114 Minimum of 1 member 27
115 Restrictions on size of partnerships and associations 27
116 Trade unions cannot be registered 27
Part 2A.2—How a company is registered 27
117 Applying for registration 27
118 ASC gives company ACN, registers company and issues certificate 29
119 Company comes into existence on registration 30
120 Members, directors and company secretary of a company 30
121 Registered office 30
122 Expenses incurred in promoting and setting up company 30
123 Company may have common seal 30
Chapter 2B—Basic features of a company 31
Part 2B.1—Company powers and how they are exercised 31
124 Legal capacity and powers of a company 31
125 Constitution may limit powers and set out objects 32
126 Agent exercising a company’s power to make contracts 32
127 Execution of documents (including deeds) by the company itself 32
Part 2B.2—Assumptions people dealing with companies are entitled to make 33
128 Entitlement to make assumptions 33
129 Assumptions that can be made under section 128 34
130 Information available to the public from the ASC does not constitute constructive notice 35
Part 2B.3—Contracts before registration 35
131 Contracts before registration 35
132 Person may be released from liability but is not entitled to indemnity 36
133 This Part replaces other rights and liabilities 37
Part 2B.4—Replaceable rules and constitution 37
134 Internal management of companies 37
135 Replaceable rules 37
136 Constitution of a company 38
137 Date of effect of adoption, modification or repeal of constitution 39
138 ASC may direct company to lodge consolidated constitution 40
139 Company must send copy of constitution to member 40
140 Effect of constitution and replaceable rules 40
141 Table of replaceable rules 41
Part 2B.5—Registered office and places of business 42
142 Registered office 42
143 ASC may change address of registered office to a director’s address 43
144 Company’s name must be displayed at registered office etc. 43
145 Opening hours of registered office of public company 44
146 Change of address of principal place of business 44
Part 2B.6—Names 45
Division 1—Selecting and using a name 45
147 When a name is available 45
148 A company’s name 45
149 Acceptable abbreviations 46
150 Exception to requirement for using “Limited” in name 47
151 Exception to requirement for using “Limited” in name— pre-existing licences 47
152 Reserving a name 48
153 Using a name and ACN on documents 48
154 Exception to requirement to have ACN on receipts 49
155 Regulations may exempt from requirement to set out information on documents 49
156 Carrying on business using “Limited”, “No Liability” or “Proprietary” in name 49
Division 2—Changing a company’s name 49
157 Company changing its name 49
158 ASC’s power to direct company to change its name 50
159 ASC’s power to include “Limited” in company’s name 50
160 ASC must issue new certificate if company’s name changes 51
161 Effect of name change 51
Part 2B.7 Changing company type 51
162 Changing company type 51
163 Applying for change of type 53
164 ASC changes type of company 55
165 ASC may direct a proprietary company to change to a public company in certain circumstances 57
166 Effect of change of type 58
167 Issue of shares by company or holding company—company limited by guarantee changing to company limited by shares 58
Chapter 2F—Members’ rights and remedies 59
246A Membership of a company 59
Part 2F.1—Oppression 59
Part 2F.2—Class rights 60
246B Varying and cancelling class rights 60
246C Certain actions taken to vary rights etc. 61
246D Variation, cancellation or modification without unanimous support of class 62
246E Variation, cancellation or modification with unanimous support of class 63
246F Company must lodge documents and resolutions with the ASC 63
246G Member’s copies of documents and resolutions 64
Part 2F.3—Inspection of books 64
247A Order for inspection of books of company or registered managed investment scheme 64
247B Ancillary orders 65
247C Disclosure of information acquired in inspection 65
247D Company or directors may allow member to inspect books (replaceable rule see section 135) 65
Chapter 2G—Meetings 66
Part 2G.1—Directors’ meetings 66
Division 1—Resolutions and declarations without meetings 66
248A Circulating resolutions of companies with more than 1 director (replaceable rule see section 135) 66
248B Resolutions and declarations of 1 director proprietary companies 66
Division 2—Directors’ meetings 67
248C Calling directors’ meetings (replaceable rule see section 135) 67
248D Use of technology 67
248E Chairing directors’ meetings (replaceable rule see section 135) 67
248F Quorum at directors’ meetings (replaceable rule see section 135) 68
248G Passing of directors’ resolutions (replaceable rule see section 135) 68
Part 2G.2—Meetings of members of companies 68
Division 1—Resolutions without meetings 68
249A Circulating resolutions of proprietary companies with more than 1 member 68
249B Resolutions of 1 member companies 69
Division 2—Who may call meetings of members 70
249C Calling of meetings of members by a director (replaceable rule—see section 135) 70
249CA Calling of meetings of members of a listed company by a director 70
249D Calling of general meeting by directors when requested by members 70
249E Failure of directors to call general meeting 71
249F Calling of general meetings by members 71
249G Calling of meetings of members by the Court 72
Division 3—How to call meetings of members 72
249H Amount of notice of meetings 72
249HA Amount of notice of meetings of listed company 73
249J Notice of meetings of members to members and directors 73
249K Auditor entitled to notice and other communications 74
249L Contents of notice of meetings of members 74
249M Notice of adjourned meetings (replaceable rule—see section 135) 75
Division 4—Members’ rights to put resolutions etc. at general meetings 75
249N Members’ resolutions 75
249O Company giving notice of members’ resolutions 76
249P Members’ statements to be distributed 76
Division 5—Holding meetings of members 78
249Q Purpose 78
249R Time and place for meetings of members 78
249S Technology 78
249T Quorum (replaceable rule—see section 135) 78
249U Chairing meetings of members (replaceable rule—see section 135) 79
249V Auditor’s right to be heard at general meetings 79
249W Adjourned meetings 80
Division 6—Proxies and body corporate representatives 80
249X Who can appoint a proxy (replaceable rule for proprietary companies and mandatory rule for public companies—see section 135) 80
249Y Rights of proxies 81
249Z Company sending appointment forms or lists of proxies must send to all members 82
250A Appointing a proxy 82
250B Proxy documents 83
250BA Proxy documents—listed companies 84
250C Validity of proxy vote 84
250D Body corporate representative 85
Division 7—Voting at meetings of members 86
250E How many votes a member has (replaceable rule—see section 135) 86
250F Jointly held shares (replaceable rule—see section 135) 86
250G Objections to right to vote (replaceable rule—see section 135) 86
250H Votes need not all be cast in the same way 87
250J How voting is carried out (replaceable rule—see section 135) 87
250K Matters on which a poll may be demanded 87
250L When a poll is effectively demanded 87
250M When and how polls must be taken (replaceable rule—see section 135) 88
Division 8—AGMs of public companies 88
250N Public company must hold AGM 88
250P Extension of time for holding AGM 89
250R Business of AGM 89
250S Questions and comments by members on company management at AGM 90
250T Questions by members of auditors at AGM 90
Part 2G.3—Minutes and members’ access to minutes 90
251A Minutes 90
251AA Disclosure of proxy votes—listed companies 91
251B Members’ access to minutes 92
Part 2G.4—Meetings of members of registered managed investment schemes 93
Division 1—Who may call meetings of members 93
252A Calling of meetings of members by responsible entity 93
252B Calling of meetings of members by responsible entity when requested by members 93
252C Failure of responsible entity to call meeting of the scheme’s members 94
252D Calling of meetings of members by members 95
252E Calling of meetings of members by the Court 95
Division 2—How to call meetings of members 96
252F Amount of notice of meetings 96
252G Notice of meetings of members to members, directors and auditors 96
252H Auditors entitled to other communications 97
252J Contents of notice of meetings of members 97
252K Notice of adjourned meetings 97
Division 3—Members’ rights to put resolutions etc. at meetings of members 98
252L Members’ resolutions 98
252M Responsible entity giving notice of members’ resolutions 98
252N Members’ statements to be distributed 99
Division 4—Holding meetings of members 100
252P Time and place for meetings of members 100
252Q Technology 100
252R Quorum 101
252S Chairing meetings of members 101
252T Auditors’ right to be heard at meetings of members 102
252U Adjourned meetings 102
Division 5—Proxies and body corporate representatives 102
252V Who can appoint a proxy 102
252W Rights of proxies 103
252X Responsible entity sending appointment forms or lists of proxies must send to all members 104
252Y Appointing a proxy 104
252Z Proxy documents 105
253A Validity of proxy vote 106
253B Body corporate representative 107
Division 6—Voting at meetings of members 108
253C How many votes a member has 108
253D Jointly held interests 108
253E Responsible entity and associates cannot vote if interested in resolution 108
253F How to work out the value of an interest 108
253G Objections to a right to vote 109
253H Votes need not all be cast in the same way 109
253J How voting is carried out 109
253K Matters on which a poll may be demanded 110
253L When a poll is effectively demanded 110
Division 7—Minutes and members’ access to minutes 110
253M Minutes 110
253N Members’ access to minutes 111
Chapter 2H—Shares 112
254AA Shares to have nominal value 112
Part 2H.1—Issuing and converting shares 112
254A Power to issue bonus, partly-paid, preference and redeemable preference shares 112
254B Terms of issue 113
254CA Nominal value of shares issued after registration 114
254CB Share premium 114
254CC Issue of shares at a discount 115
254D Pre-emption for existing shareholders on issue of shares in proprietary company (replaceable rule—see section 135) 116
254E Court validation of issue 117
254F Bearer shares and stock must not be issued 117
254G Conversion of shares 117
254H Resolution to convert shares into larger or smaller number 118
Part 2H.2—Redemption of redeemable preference shares 119
254J Redemption must be in accordance with terms of issue 119
254K Other requirements about redemption 119
254L Consequences of contravening section 254J or 254K 120
Part 2H.3—Partly-paid shares 120
254M Liability on partly-paid shares 120
254N Calls may be limited to when company is externally‑administered 121
254P No liability companies—calls on shares 121
254Q No liability companies—forfeiture and sale of shares for failure to meet call 121
254R No liability companies—redemption of forfeited shares 124
Part 2H.4—Capitalisation of profits 124
254S Capitalisation of profits (replaceable rule—see section 135) 124
Part 2H.5—Dividends 125
254T Dividends to be paid out of profits 125
254U Other provisions about paying dividends (replaceable rule—see section 135) 125
254V When does the company incur a debt? 125
254W Dividend rights 126
Part 2H.6—Notice requirements 126
254X Notice to ASC of share issue 126
254Y Notice to ASC of share cancellation 127
Chapter 2J—Transactions affecting share capital 128
Part 2J.1—Share capital reductions and share buy-backs 128
Division 1—Reductions in share capital not otherwise authorised by law 128
256A Reductions in share capital 128
256B Court order confirming the reduction 129
256C The creditor protection test 129
256D Putting the capital reduction into effect 131
256E Effect of reduction of share capital on members and former members 132
256F Consequences of failing to comply with section 256A 133
Division 2—Share buy-backs 134
257AA Purpose 134
257A The company’s power to buy back its own shares 134
257B Buy-back procedure—general 135
257C Buy-back procedure—shareholder approval if the 10/12 limit exceeded 137
257D Buy-back procedure—special shareholder approval for selective buy-back 138
257E Buy-back procedure—lodgment of offer documents with the ASC 139
257F Notice of intended buy-back 139
257G Buy-back procedure—disclosure of relevant information when offer made 140
257H Acceptance of offer and transfer of shares to the company 140
257J Signposts to other relevant provisions 140
Division 3—Other share capital reductions 142
258A Unlimited companies 142
258B Right to occupy or use real property 142
258C Brokerage or commission 143
258D Cancellation of forfeited shares 143
258E Other authorised reductions 143
258F Reductions because of lost capital 143
Part 2J.2—Self-acquisition and control of shares 144
259A Directly acquiring own shares 144
259B Taking security over own shares or shares in holding company 144
259C Issuing or transferring shares to controlled entity 145
259D Company controlling entity that holds shares in it 146
259E When a company controls an entity 147
259F Consequences of failing to comply with section 259A or 259B 148
Part 2J.3—Financial assistance 148
260A Financial assistance by a company for acquiring shares in the company or a holding company 148
260B Shareholder approval 149
260C Exempted financial assistance 150
260D Consequences of failing to comply with section 260A 152
Part 2J.4—Interaction with general directors’ duties 152
260E General duties still apply 152
Chapter 2M—Financial reports and audit 152
Part 2M.1—Overview 152
285 Overview of obligations under this Chapter 152
Part 2M.2—Financial records 154
286 Obligation to keep financial records 154
287 Language requirements 155
288 Physical format 155
289 Place where records are kept 155
290 Director access 156
291 Signposts to other relevant provisions 156
Part 2M.3—Financial reporting 157
Division 1—Annual financial reports and directors’ reports 157
292 Who has to prepare annual financial reports and directors’ reports 157
293 Small proprietary company—shareholder direction 158
294 Small proprietary company—ASC direction 158
295 Contents of annual financial report 159
296 Compliance with accounting standards and regulations 160
297 True and fair view 160
298 Annual directors’ report 161
299 Annual directors’ report—general information 161
300 Annual directors’ report—specific information 162
300A Annual directors’ report—specific information to be provided by listed companies 167
301 Audit of annual financial report 167
Division 2—Half-year financial report and directors’ report 168
302 Disclosing entity must prepare half-year financial report and directors’ report 168
303 Contents of half-year financial report 168
304 Compliance with accounting standards and regulations 169
305 True and fair view 170
306 Half-year directors’ report 170
Division 3—Audit and auditor’s report 170
307 Audit 170
308 Auditor’s report on annual financial report 171
309 Auditor’s report on half-year financial report 171
310 Auditor’s power to obtain information 172
311 Reporting to ASC 173
312 Assisting auditor 173
313 Special provisions on audit of borrowing corporations and guarantor bodies 173
Division 4—Annual financial reporting to members 174
314 Annual financial reporting to members 174
315 Deadline for reporting to members 175
316 Member’s choices for annual financial information 176
317 Consideration of reports at AGM 176
318 Additional reporting by debenture issuers 177
Division 5—Lodging reports with the ASC 177
319 Lodgment of annual reports with the ASC 177
320 Lodgment of half-year reports with the ASC 179
321 ASC power to require lodgment 179
322 Relodgment if financial statements or directors’ reports amended after lodgment 179
Division 6—Special provisions about consolidated financial statements 180
323 Directors and officers of controlled entity to give information 180
323A Auditor’s power to obtain information from controlled entity 180
323B Controlled entity to assist auditor 180
323C Application of Division to entity that has ceased to be controlled 181
Division 7—Financial years and half-years 181
323D Financial years and half-years 181
Division 8—Disclosure by listed companies of information filed overseas 182
323DA Listed companies to disclose information filed overseas 182
Part 2M.5—Accounting standards 182
334 Accounting standards 182
335 Equity accounting 183
336 Comparative amounts 183
337 Interpretation of accounting standards 183
338 Severing invalid provisions 184
339 Evidence of text of accounting standard 184
Part 2M.6—Exemptions and modifications 184
340 ASC’s power to make specific exemption orders 184
341 ASC’s power to make class orders 185
342 Criteria for specific exemption orders and class orders 185
343 Modification by regulations 186
Part 2M.7—Sanctions for contraventions of Chapter 187
344 Contravention of Part 2M.2 or 2M.3 187
Chapter 2N—Annual returns and lodgments with the ASC 187
Part 2N.1—Annual returns 187
345 Deadline for lodging annual return 187
346 Solvency resolution—companies 188
347 Lodging annual return with ASC 188
348 Contents of annual return—companies 189
349 Contents of annual return—registered schemes 190
Part 2N.2—Lodgments with ASC 191
350 Forms for documents to be lodged with ASC 191
351 Signing documents lodged with ASC 192
352 Documents lodged with ASIC electronically 192
Chapter 5A—Deregistration of companies 193
601AA Deregistration—voluntary 193
601AB Deregistration—ASC initiated 194
601AC Deregistration—following amalgamation or winding up 195
601AD Effect of deregistration 195
601AE What the ASC does with the property 196
601AF ASC’s power to fulfil outstanding obligations of deregistered company 197
601AG Claims against insurers of deregistered company 198
601AH Reinstatement 198
Chapter 5B—Bodies corporate registered as companies, and registrable bodies 199
Part 05B.1—Registering a body corporate as a company 199
Division 1—Registration 199
601BA Bodies corporate may be registered as certain types of companies 199
601BB Bodies registered as proprietary companies 200
601BC Applying for registration under this Part 200
601BD ASC gives body ACN, registers as company and issues certificate 203
601BE Registered office 204
601BF Name 204
601BG Constitution 204
601BH Modifications of constitution 205
601BJ ASC may direct company to apply for Court approval for modifications of constitution 205
601BK Establishing registers and minute books 205
601BL Registration of registered bodies 206
Division 2—Operation of the Corporations Law 206
601BM Effect of registration under this Part 206
601BN Liability of members on winding up 206
601BP Bearer shares 207
601BR First AGM 207
601BS Modification by regulations 208
Part 5B.3—Names of registrable Australian bodies and foreign companies 208
601DA Reserving a name 208
601DB Acceptable abbreviations 208
601DC When a name is available 209
601DD Registered Australian bodies and registered foreign companies can carry on business with some names only 210
601DE Using a name and ARBN 210
601DF Exception to requirement to have ARBN on receipts 211
601DG Regulations may exempt from requirement to set out information on documents 211
601DH Notice of name change must be given to the ASC 211
601DJ ASC’s power to direct a registered name be changed 211
Chapter 10—National scheme provisions 212
1362A Recognition of companies from other jurisdictions 212
1362B Transfer of registration 212
1362BA Compensation for compulsory acquisition 213
Chapter 11—Application and transitional provisions 214
Part 11.1—Introduction of the Corporations Law 214
1362CA Existing company 214
1362CB Existing company taken to be registered under the Corporations Law 214
1362CC Constitution of existing company 215
1362CD Application of Law to existing companies 215
1362CE Acts preparatory to external administration of existing company 216
1362CF Appointments of receivers 217
1362CG Application of Division 2 of Part 5.6 217
1362CH Reinstatement of companies deregistered before commencement 217
1362CJ Registrable Australian bodies and foreign companies 217
Division 10—Changes resulting from the Company Law Review Act 1998 218
1412 Meaning of commencement, new Law and old Law 218
1413 Registration—existing companies continue to be registered 219
1414 Registration—application orders under subsection 112(3) of the old Law 219
1415 Basic features of a company—memorandum and articles are taken to be constitution 219
1416 Basic features of a company—companies limited both by shares and by guarantee 219
1417 Basic features of a company—acts before external administration of existing company 220
1418 Basic features of a company—registered office 220
1419 Basic features of a company—opening hours of registered office of public company 221
1420 Basic features of a company—name, reservation of name and ACN continues 221
1421 Members’ rights and remedies—applications for inspection orders under repealed provisions 221
1422 Meetings—AGM before commencement 221
1423 Meetings—first AGM for companies incorporated before commencement 222
1424 Meetings—general transitional arrangements 222
1425 Nominal value 224
1426 Share capital—calls on partly-paid shares 224
1427 Share capital—provisions in constitution about amount of share capital and division into shares 224
1428 Share capital—conversion of stock into shares 225
1429 Share capital—previous Law continues to apply to capital reductions initiated before commencement 225
1430 Share capital—continued operation of other repealed provisions 225
1431 Financial reports and audit—application of Chapter 2M to periods that end after commencement, and continued application of repealed provisions to past periods 226
1432 Financial reports and audit—lodgment of accounts by public companies that are not disclosing entities 226
1433 Financial reports and audit—continued operation of accounting standards 227
1434 Financial reports and audit—continued operation of exemption orders 227
1435 Annual returns—solvency resolution 228
1436 Annual returns—application of annual return provisions 228
1437 Deregistration—previous Law continues to apply to deregistrations initiated before commencement 228
1438 Deregistration—property vested in ASC under previous laws 228
1439 Deregistration—reinstatement of registration where application under section 571 or subsection 574(3) made before commencement 229
1440 Deregistration—deregistration of companies dissolved under the State Bank (Corporatisation) Act 1994 of South Australia 229
1441 Accounting standards made under section 32 of the Corporations Act 1989 230
1442 References in State laws and other documents 230
Schedule 2—Consequential amendment of the Corporations Law 232
109X Service of documents 238
224B Single director/shareholder proprietary companies 241
224C Company may appoint a director (replaceable rule—see section 135) 242
224D Directors may appoint other directors (replaceable rule—see section 135) 242
226A Powers of directors (replaceable rule—see section 135) 243
226B Negotiable instruments (replaceable rule—see section 135) 243
226C Managing director (replaceable rule—see section 135) 243
226D Delegation to committees (replaceable rule—see section 135) 244
226E Removal by members—proprietary companies (replaceable rule—see section 135) 244
227A Director may resign by giving written notice to company (replaceable rule—see section 135) 244
236A Remuneration of directors (replaceable rule—see section 135) 246
242 Notice of name and address of directors and secretaries to ASC 247
242AA Address for officers 248
524 Past member of former limited company 253
52A Signing 261
225A Alternate directors (replaceable rule—see section 135) 262
1091AA Transmission of shares on death (replaceable rule—see section 135) 274
1091AB Transmission of shares on bankruptcy (replaceable rule—see section 135) 275
1091B Transmission of shares on mental incapacity (replaceable rule—see section 135) 276
1091D Registration of transfers (replaceable rule—see section 135) 276
1091E Additional general discretion for directors of proprietary companies to refuse to register transfers (replaceable rule—see section 135) 277
111AO Accounting requirements 284
325 Appointment of auditor by proprietary company 286
Part 7.5—Dealers’ financial statements and audit 289
Part 8.5—Financial statements and audit 293
1355 Doing act without payment of fee 297
Schedule 3—Amendment of the Corporations Law to relocate provisions and make other structural changes 304
Chapter 2C—Registers 307
Chapter 2D—Officers 309
Chapter 2E—Financial benefits to related parties 309
Part 2E.1—Object and outline of Part 309
Part 2E.2—The meaning of expressions 310
Part 2E.3—The prohibitions 310
Part 2E.4—General exceptions 310
Part 2E.5—Financial benefits approved by general meeting of public company 311
Division 1—Exceptions from the prohibitions 311
Division 2—Conditions to be satisfied 312
Part 2E.6—Enforcement 312
Chapter 2K—Charges 313
Part 2K.1—Preliminary 313
Part 2K.2—Registration 313
Part 2K.3—Order of priority 318
Part 2M.4—Auditor 319
Part 5B.2—Registrable bodies 320
Part 11.2—Commencement and application of certain changes to this Law 324
Schedule 4—Consequential amendment of other legislation 326
Schedule 5—Amendments in relation to nominal value and share capital reductions 332
254C No par value shares 334
254H Resolution to convert shares into larger or smaller number 334
254K Other requirements about redemption 334
254S Capitalisation of profits 335
254T Dividends to be paid out of profits 335
256A Purpose 335
256B Company may make reduction not otherwise authorised 336
256C Shareholder approval 337
256D Consequences of failing to comply with section 256B 338
256E Signposts to other relevant provisions 338
258E Other share cancellations 340
258F Reductions because of lost capital 340
601BQ References in pre-registration contracts and other documents to par value in existing contracts and documents 341
Division 11—Changes resulting from Schedule 5 to the Company Law Review Act 1998 342
1443 Meaning of commencement, new Law and old Law 342
1444 Share capital—application of new no par value rule to shares issued before commencement 342
1445 Share capital—references to amount paid on shares issued before commencement 343
1446 Share capital—transfer of money in share premium account and capital redemption reserve into the share capital account 343
1447 Share capital—use of amount standing to credit of share premium account 343
1448 Share capital—calls on partly-paid shares 344
1449 Share capital—references in pre-commencement contracts and other documents to par value 344
1450 Share capital—previous Law continues to apply to capital reductions initiated before commencement 345
233A Transfer by life insurance company to statutory fund 345
Notes 347
An Act to amend the Corporations Law, and for related purposes
1 Short title etc.
(1) This Act may be cited as the Company Law Review Act 1998.
(2) In this Act:
Corporations Law means the Corporations Law set out in section 82 of the Corporations Act 1989.
2 Commencement [see Note 1]
(1) Sections 1 and 2 commence on the day on which this Act receives the Royal Assent.
(2) Subject to subsection (3), section 3 and Schedules 1, 2, 3 and 4 commence on a day to be fixed by Proclamation.
(3) If that section and those Schedules do not commence under subsection (2) within the period of 6 months beginning on the day on which this Act receives the Royal Assent, they commence on the first day after the end of that period.
(4) The amendments in Schedules 1, 2, 3 and 4 commence on the day determined under subsections (2) and (3) in this order:
(a) first, items 29, 30 and 199 of Schedule 3;
(b) then, the items in Schedules 1, 2 and 4 and the remaining items in Schedule 3 (other than items 32, 85, 158 and 198);
(c) then, items 32, 85, 158 and 198 of Schedule 3.
(5) Schedule 5 commences immediately after section 1 of the Taxation Laws Amendment (Company Law Review) Act 1998 commences.
3 Schedules
Subject to section 2, the Corporations Law and each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Schedule 1—Main amendments of the Corporations Law
1 Part 1.5, the heading to Chapter 2 and Parts 2.1, 2.2, 2.3 and 2.4
Repeal the Parts and heading, substitute:
Part 1.5—Small business guide
This guide summarises the main rules in the Corporations Law that apply to proprietary companies limited by shares—the most common type of company used by small business. The guide gives a general overview of the Corporations Law as it applies to those companies and directs readers to the operative provisions in the Law.
The notes in square brackets at the end of paragraphs in the guide indicate the main provisions of the Corporations Law, the regulations made under the Law, and Australian Securities Commission Practice Notes that are relevant to the information in the paragraphs.
Other Commonwealth, State and Territory laws also impose obligations on proprietary companies and their operators.
1 What registration means
1.1 Separate legal entity that has its own powers
As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company’s money and other assets belong to the company and must be used for the company’s purposes.
A company has the powers of an individual, including the powers to:
• own and dispose of property and other assets
• enter into contracts
• sue and be sued.
Once a company is registered, its separate legal status, property, rights and liabilities continue until the ASC (Australian Securities Commission) deregisters the company.
[sections 119, 124–125, 601AA–601AD]
1.2 Limited liability of shareholders
Shareholders of a company are not liable (in their capacity as shareholders) for the company’s debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, particularly if a shareholder is also a director, this limitation may be affected by other laws and the commercial practices discussed in 1.3 and 1.4.
[section 516]
1.3 Director’s liability for company’s debts
A director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due.
A director of a company may be liable to compensate the company for any losses the company suffers from a breach of certain of the director’s duties to the company (see 5.3).
In addition to having liability for the company’s debts or to pay compensation to the company, a director may also be subject to a civil penalty.
If a company holds property on trust, a director of the company may be liable in some circumstances for liabilities incurred by the company as trustee.
[sections 232, 233, 344, 588G, 588J, 588M, 1317HA, 1317HD]
1.4 Director’s liability as guarantor/security over personal assets
As a matter of commercial practice, a bank, trade creditor or anyone else providing finance or credit to a company may ask a director of the company:
• for a personal guarantee of the company’s liabilities; and
• for some form of security over their house or personal assets to secure the performance by the company of its obligations.
The director of a company may, for example, be asked by a bank to give a mortgage over their house to secure the company’s repayment of a loan. If the company does not repay the loan as agreed with the bank, the director may lose the house.
1.5 Continuous existence
A company continues to exist even if 1 or more of its shareholders or directors sells their shares, dies or leaves the company. If a company has only 1 shareholder who is also the only director of the company and that person dies, their personal representative is able to ensure that the company continues to operate.
[sections 119, 224A]
1.6 Rules for the internal management of a company
The Law contains a basic set of rules for the internal management of a company (appointments, meetings etc.).
Some of these rules are mandatory for all companies. There are a few special rules for single shareholder/single director companies.
Other internal management rules in the Law are replaceable rules. The replaceable rules do not apply to:
• a single shareholder/single director company; or
• a company that had a constitution before the introduction of the replaceable rules regime and has not repealed it.
A company does not need to have a separate constitution of its own; it can simply take advantage of the rules in the Law. The company will need a constitution only if it wants to displace, modify or add to the replaceable rules.
[sections 134–141, 224B]
1.7 How a company acts
A company does not have a physical existence. It must act through other people.
Individual directors, the company secretary, company employees or agents may be authorised to enter into contracts that bind the company (see 7).
In some circumstances, a company will be bound by something done by another person (see 1.8).
1.8 Directors
The directors of a company are responsible for managing the company’s business. It is a replaceable rule (see 1.6) that generally the directors may exercise all the powers of the company except a power that the Law, a replaceable rule or a provision of the company’s constitution (if any) requires the company to exercise in general meeting.
The only director of a company who is also the only shareholder is responsible for managing the company’s business and may exercise all of the company’s powers.
The Law sets out rules dealing with the calling and conduct of directors’ meetings. Directors must keep a written record (minutes) of their resolutions and meetings.
There are 2 ways that directors may pass resolutions:
• at a meeting; or
• by having all of the directors record and sign their decision.
If a company has only 1 director, the sole director may also pass a resolution by recording and signing their decision.
[sections 224B, 226A, 248A–248G, 251A]
1.9 Shareholders
The shareholders of a company own the company, but the company has a separate legal existence and the company’s assets belong to the company.
Shareholders can make decisions about the company by passing a resolution, usually at a meeting. A “special resolution” usually involves more important questions affecting the company as a whole or the rights of some or all of its shareholders.
There are 2 ways that shareholders may pass a resolution:
• at a meeting; or
• by having all of the shareholders record and sign their decision.
If a meeting is held, an ordinary resolution must be passed by a majority of the votes cast by shareholders of the company entitled to vote on the resolution at the meeting in person or by proxy (if proxies are allowed). A special resolution must be passed by at least 75% of the votes cast by shareholders of the company entitled to vote on the resolution and who vote at the meeting in person or by proxy (if proxies are allowed).
The sole shareholder of a company may pass a resolution by recording and signing their decision.
A company must keep a written record (minutes) of the members’ resolutions and meetings.
[sections 9 (special resolution), 249A, 249B, 249L, 251A]
1.10 What others can assume about the company
Anyone who does any business with the company is entitled to assume that the company has a legal right to conduct that business unless the person knows, or suspects, otherwise. For example, an outsider dealing with the company is entitled to assume:
• that a person who is shown in a notice lodged with the ASC as being the director or company secretary of a company has been properly appointed and is authorised to act for the company; and
• that a person who is held out by the company to be a director, company secretary or agent of the company has been properly appointed and is authorised to act for the company.
[sections 128–130]
2 The company structure for small business
2.1 Proprietary company for small business
Generally, a proprietary company limited by shares is the most suitable company for use by small business. Such a proprietary company must have a least 1 shareholder but no more than 50 shareholders (not counting employee shareholders). It may have 1 or more directors.
[sections 112–113]
3 Setting up a new company
The operators of small businesses can either buy “shelf” companies or set up new companies themselves.
3.1 “Shelf” companies
The operator of a small business may find it more convenient to buy a “shelf” company (a company that has already been registered but has not traded) from businesses which set up companies for this purpose or from some legal or accounting firms.
3.2 Setting up a company
To set up a new company themselves, the operator must apply to the ASC for registration of the company.
A proprietary company limited by shares must have at least 1 shareholder.
To obtain registration, a person must lodge a properly completed application form with the ASC. The form must set out certain information including details of every person who has consented to be a shareholder, director or company secretary of the company.
The company comes into existence when the ASC registers it.
[sections 117–119, 135–136, 140]
3.3 ACN and name
When a company is registered, the ASC allocates to it a unique 9 digit number called the Australian Company Number (ACN). (For use of the ACN see 4.1).
In practice, a new company must have a name that is different from the name of a company that is already registered. A proprietary company limited by shares must have the words “Proprietary Limited” as part of its name. Those words can be abbreviated to “Pty Ltd”.
A proprietary company may adopt its ACN as its name. If it does so, its name must also contain the words “Australian Company Number” (which can be abbreviated to “ACN”). For example, the company’s name might be “ACN 123 456 789 Pty Ltd”.
[sections 119, 147–161]
3.4 Contracts entered into before the company is registered
A company can ratify a contract entered into by someone on its behalf or for its benefit before it was registered. If the company does not ratify the contract, the person who entered into the contract may be personally liable.
[sections 131–133]
3.5 First shareholders, directors and company secretary
A person listed with their consent as a shareholder, director or company secretary in the application for registration of the company becomes a shareholder, director or company secretary of the company on its registration.
The same person may be both a director of the company and the company secretary.
See 5.1 and 5.2 for directors and 5.4 for company secretaries. See 6.1 for shareholders.
[section 120]
3.6 Issuing shares
It is a replaceable rule (see 1.6) that, before issuing new shares, a company must first offer them to the existing shareholders in the proportions that the shareholders already hold. A company may issue shares at a price it determines.
[sections 254B, 254D]
3.7 Registered office
A company must have a registered office in Australia and must inform the ASC of the location of the office. A post office box cannot be the registered office of a company. The purpose of the registered office is to have a place where all communications and notices to the company may be sent.
If the company does not occupy the premises where its registered office is located, the occupier of the premises must agree in writing to having the company’s registered office located there.
A proprietary company is not required to open its registered office to the public but this does not affect its obligation to make documents available for inspection.
The company must notify the ASC of any change of address of its registered office.
[sections 100, 142, 143, 173, 1300]
3.8 Principal place of business
If a company has a principal place of business that is different to its registered office, it must notify the ASC of the address of its principal place of business and of any changes to that address.
[sections 117, 146]
3.9 Registers kept by the company
A company must keep registers, including a register of shareholders and a register of charges. A company must keep its registers at:
• the company’s registered office; or
• the company’s principal place of business; or
• a place (whether on premises of the company or of someone else) where the work in maintaining the register is done; or
• another place approved by the ASC.
A register may be kept either in a bound or looseleaf book or on computer.
If a register is kept on computer, its contents must be capable of being printed out in hard copy.
[sections 172, 1300–1302, 1306]
3.10 Register of shareholders
A company must keep in its register of shareholders such information as:
• the names and addresses of its shareholders; and
• details of shares held by individual shareholders.
[sections 168–169]
3.11 Register of charges
A company must keep a register of charges if the company gives a bank, trade creditor or anybody else a charge over company assets.
[section 271]
4 Continuing obligations after the company is set up
The Corporations Law and other laws impose obligations on companies themselves and on their directors and company secretaries. Some of the more important obligations imposed under the Corporations Law are discussed below.
4.1 Use of company name and ACN
The name of a company must be shown at all the company’s business premises (including its registered office) that are open to the public. The company’s name and its ACN must appear:
• on some of its public documents; and
• on its cheques and negotiable instruments; and
• on all documents lodged with the ASC; and
• if it has one, on its common seal.
[sections 123, 144, 147–156,
Australian Securities Commission Practice Note 47]
4.2 Annual return
A company must lodge with the ASC an annual return which contains such information as:
• names and addresses of each director and company secretary; and
• issued shares and options granted; and
• details of its shareholders; and
• address of its registered office; and
• address of its principal place of business; and
• a statement that the directors have resolved in the last month that, in the directors’ opinion, there are reasonable grounds to believe the company will be able to pay its debts as and when they become payable (but if the company has lodged an annual financial report with the ASC within the last 12 months, it does not need to include this statement).
An annual return may be lodged with the ASC on a printed form or, if an agreement is in place to lodge electronically, in accordance with the agreement.
The ASC may send a partially completed annual return to a company that wants to lodge its annual return on a printed form for the company to check, amend if necessary, verify and send back to the ASC. However, a company must lodge an annual return with the ASC even if the ASC does not send a partially completed annual return to the company.
[sections 345–348, 352]
4.3 Annual fee
A company must pay an annual fee to the ASC on lodgment of the annual return.
[Corporations (Fees) Regulations]
4.4 Notification to ASC of changes
The company must notify the ASC if certain basic changes to the company occur. The following table sets out these notification requirements.
| Notification requirements | |||||
| If . . . | the company must notify the ASC of the change . . . | using Form No. . . . | see section . . . | ||
| 1. | a company issues shares | within 1 month after the issue | 207 | 254X | |
| 2. | a company changes the location of a register | within 7 days after the change | 909 | 172, 1302 | |
| 3. | a company changes the address of its registered office or principal place of business | within 14 days after the change | 203 | 142, 146 | |
| 4. | a company changes its directors or company secretary | within 14 days after the change | 304 | 242 | |
| 5. | there is a change in the name or address of the company’s directors or secretary | within 14 days after the change | 304 | 242 | |
| 6. | a company creates certain kinds of charges | within 45 days after the charge is created | 309 | 263 | |
5 Company directors and company secretaries
5.1 Who can be a director
Only an individual who is at least 18 years old can be a director. If a company has only 1 director, they must ordinarily reside in Australia. If a company has more than 1 director, at least 1 of the directors must ordinarily reside in Australia.
A director must consent in writing to holding the position of director. The company must keep the consent and must notify the ASC of the appointment.
In some circumstances, the Corporations Law imposes the duties and obligations of a director on a person who, although not formally appointed as a director of a company, nevertheless acts as a director or gives instructions to the formally appointed directors as to how they should act.
The Court or the ASC may prohibit a person from being a director or from otherwise being involved in the management of a company if, for example, the person has breached the Corporations Law.
A person needs the Court’s permission to be a director if the person has been convicted of certain offences or is, in some circumstances, unable to pay their debts as they fall due.
Generally, a director may resign by giving notice of the resignation to the company. The company must notify the ASC of a director’s resignation. A director who resigns may also notify the ASC of the resignation.
[sections 60, 221, 222A, 224, 228–230, 242, 242C, 599, 600, 1317EA(3)]
5.2 Appointment of new directors
It is a replaceable rule (see 1.6) that shareholders may appoint directors by resolution at a general meeting.
[section 224C]
5.3 Duties and liabilities of directors
In managing the business of a company (see 1.7), each of its directors is subject to a wide range of duties under the Corporations Law and other laws. Some of the more important duties are:
• to act in good faith
• to act in the best interests of the company
• to avoid conflicts between the interests of the company and the director’s interests
• to act honestly
• to exercise care and diligence
• to prevent the company trading while it is unable to pay its debts
• if the company is being wound up—to report to the liquidator on the affairs of the company
• if the company is being wound up—to help the liquidator (by, for example, giving to the liquidator any records of the company that the director has).
A director who fails to perform their duties:
• may be guilty of a criminal offence with a penalty of $200,000 or imprisonment for up to 5 years, or both; and
• may contravene a civil penalty provision (and the Court may order the person to pay to the Commonwealth an amount of up to $200,000); and
• may be personally liable to compensate the company or others for any loss or damage they suffer; and
• may be prohibited from managing a company.
A director’s obligations may continue even after the company has been deregistered.
[sections 232, 475, 530A, 588G, 596, 601AD, 601AH, 1317FA,
1317HA, 1317HB, 1317HD]
5.4 Company secretaries
A company must have a company secretary. The directors appoint the company secretary. A company secretary must be at least 18 years old. If a company has only 1 company secretary, they must ordinarily reside in Australia. If a company has more than 1 company secretary, at least 1 of them must ordinarily reside in Australia.
A company secretary must consent in writing to holding the position of company secretary. The company must keep the consent and must notify the ASC of the appointment.
The same person may be both a director of a company and the company secretary.
Generally, a company secretary may resign by giving written notice of the resignation to the company. The company must notify the ASC of a company secretary’s resignation. A company secretary who resigns may also notify the ASC of the resignation.
The company secretary is an officer of the company and, in that capacity, may be subject to the requirements imposed by the Corporations Law on company officers. The company secretary has specific responsibilities under the Corporations Law, including responsibility for ensuring that the company notifies the ASC about changes to the identities, names and addresses of the company’s directors and company secretaries and that the company lodges its annual return.
A company secretary’s obligations may continue even after the company has been deregistered.
[sections 83, 142, 222A, 240, 242, 242C, 345, 601AD, 601AH]
6 Shares and shareholders
A proprietary company limited by shares must have a share capital and at least 1 shareholder. The ASC may apply to a Court to have a company wound up if it does not have any shareholders.
[sections 461– 462]
6.1 Becoming a shareholder and ceasing to be a shareholder
A person may become a shareholder of a company in several ways, including the following:
• the person being listed as a shareholder of the company in the application for registration of the company
• the company issuing shares to the person
• the person buying shares in the company from an existing shareholder and the company registering the transfer.
Some of the ways in which a person ceases to be a shareholder are:
• the person sells all of their shares in the company and the company registers the transfer of the shares
• the company buys back all the person’s shares
• the ASC cancels the company’s registration.
[sections 117, 120, 601AA–601AD]
6.2 Classes of shares
A company may have different classes of shares. The rights and restrictions attached to the shares in a class distinguish it from other classes of shares.
[sections 254A–254B]
6.3 Meetings of shareholders
Directors have the power to call meetings of all shareholders or meetings of only those shareholders who hold a particular class of shares.
Shareholders who hold at least 5% of the votes which may be cast at a general meeting of a company have the power to call and hold a meeting themselves or to require the directors to call and hold a meeting. Meetings may be held regularly or to resolve specific questions about the management or business of the company.
The Law sets out rules dealing with shareholders’ meetings.
A shareholder of a company may ask the company for a copy of the record of a meeting or of a decision of shareholders taken without a meeting.
[sections 249A–251B]
6.4 Voting rights
Different rights to vote at meetings of shareholders may attach to different classes of shares. It is a replaceable rule (see 1.6) that, subject to those different rights, each shareholder has 1 vote on a show of hands and, on a poll, 1 vote for each share held.
[sections 250E, 254A–254B]
6.5 Buying and selling shares
A shareholder may sell their shares but only if the sale would not breach the company’s constitution (if any). It is a replaceable rule (see 1.6) that the directors have a discretion to refuse to register a transfer of shares.
[sections 1091D–1091E]
7 Signing company documents
A company’s power to sign, discharge and otherwise deal with contracts can be exercised by an individual acting with the company’s authority and on its behalf. A company can deal with contracts without using a common seal.
A company may execute a document by having it signed by:
• 2 directors of the company; or
• a director and the company secretary; or
• for a company with a sole director who is also the sole secretary—that director.
If the document is to have effect as a deed, it should be expressed to be a deed.
[sections 126–127, 240]
A company is not required to have a common seal. If it does, the seal must show the company’s name and its ACN. The seal is equivalent to the company’s signature and may be used on important company documents such as mortgages.
[sections 123, 127(2)]
8 Funding the company’s operations
The shareholders may fund the company’s operations by lending money to the company or by taking up other shares in the company. Except if it is raising funds from its own employees or shareholders, a proprietary company must not engage in any fundraising activity that would require the company to lodge a prospectus with the ASC (for example, advertising in a newspaper inviting people to invest in the company).
The company may also borrow money from banks and other financial organisations.
Anyone who has lent money, or provided credit, to the company may ask for a mortgage or charge over the company’s assets to secure the performance by the company of its obligations.
[sections 113, 124]
9 Returns to shareholders
Shareholders can take money out of the company in a number of ways, but only if the company complies with its constitution (if any), the Corporations Law and all other relevant laws. If a company pays out money in a way that results in the company being unable to pay its debts as they fall due, its directors may be liable:
• to pay compensation; and
• for criminal and civil penalties.
[sections 588G, 1317FA, 1317HA, 1317HB, 1317HD]
9.1 Dividends
Dividends are payments to shareholders out of the company’s after tax profits. It is a replaceable rule (see 1.6) that the directors decide whether the company should pay a dividend.
[sections 254T, 254U]
9.2 Buy–back of shares
A company can buy back shares from shareholders.
[sections 257A–257J]
9.4 Distribution of surplus assets on winding up
If a company is wound up and there are any assets left over after all the company’s debts have been paid, the surplus is distributed to shareholders in accordance with the rights attaching to their shares.
10 Annual financial reports and audit
10.1 The small/large distinction
The accounting requirements imposed on a proprietary company under the Corporations Law depend on whether the company is classified as small or large. A company’s classification can change from 1 financial year to another as its circumstances change.
A company is classified as small for a financial year if it satisfies at least 2 of the following tests:
• gross operating revenue of less than $10 million for the year
• gross assets of less than $5 million at the end of the year
• fewer than 50 employees at the end of the year.
A company that does not satisfy at least 2 of these tests is classified as large.
[section 45A]
As the great majority of proprietary companies are small under these tests, the discussion below deals mainly with the accounting requirements for small proprietary companies.
[sections 286–301]
10.2 Financial records
Under the Corporations Law, all proprietary companies must keep sufficient financial records to record and explain their transactions and financial position and to allow true and fair financial statements to be prepared and audited. Financial record here means some kind of systematic record of the company’s financial transactions—not merely a collection of receipts, invoices, bank statements and cheque butts. Financial records may be kept on computer.
[sections 286–289]
10.3 Preparing annual financial reports and directors’ reports
The Corporations Law requires a small proprietary company to prepare an annual financial report (an annual profit and loss statement, a balance sheet and a statement of cash flows) and a directors’ report (about the company’s operations, dividends paid or recommended, options issued etc.) if:
• the shareholders with at least 5% of the votes in the company direct it to do so; or
• the ASC directs it to do so.
Unless the shareholders’ direction specifies otherwise, the company must prepare the annual financial report in accordance with the applicable accounting standards.
Although the Corporations Law itself may not require a small proprietary company to prepare a financial report except in the circumstances mentioned, the company may need to prepare the annual financial reports for the purposes of other laws (for example, income tax laws). Moreover, good business practice may also make it advisable for the company to prepare the financial reports so that it can monitor and better manage its financial position.
Large proprietary companies must prepare annual financial reports and a directors’ report, have the financial report audited and send both reports to shareholders. They must also lodge the annual financial reports with the ASC unless exempted.
[sections 286–301, 319–320]
11 Disagreements within the company
11.1 Special problems faced by minority shareholders
There are remedies available to a shareholder of a company if:
• the affairs of the company are being conducted in a way that is unfair to that shareholder or to other shareholders of the company; or
• the affairs of the company are being conducted in a way that is against the interests of the company as a whole.
A Court may, for example, order the winding up of a company or the appointment of a receiver.
[sections 246AA, 461]
11.2 Buy–back of shares
A company may buy back the shares of a shareholder who wants to sever their relationship with the company.
[sections 257A–257J]
11.3 Selling shares
A shareholder in a company who wants to sever their relationship with the company may decide to sell their shares. However, the shareholder may not be able to sell their shares readily—particularly if they want to sell their shares to someone who is not an existing shareholder. Some of the difficulties they may face in that case are:
• under the replaceable rules the directors have a discretion to refuse to transfer the shares; and
• restrictions in the company’s constitution (if any) on transferring shares.
[sections 995, 1018, 1091D–1091E]
12 Companies in financial trouble
12.1 Voluntary administration
If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company’s creditors and the company can work out a solution to the company’s problems.
If the company’s creditors and the company cannot agree, the company may be wound up (see 12.3).
[Part 5.3A]
12.2 Receivers
A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.
[Part 5.2]
12.3 Winding up and distribution
A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.
A liquidator is appointed:
• when a Court orders a company to be wound up; or
• the shareholders of a company pass a resolution to wind up the company.
[Part 5.2, section 495]
12.4 Liquidators
A liquidator is appointed to administer the winding up of a company. The liquidator’s main functions are:
• to take possession of the company’s assets; and
• to determine debts owed by the company and pay the company’s creditors; and
• to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and
• finally, to have the company deregistered.
[Parts 5.4B, 5.5]
12.5 Order of payment of debts
Generally, creditors who hold security over company assets are paid first.
[Division 6 of Part 5.6]
12.6 Cancellation of registration
If a company has ceased trading or has been wound up, it remains on the register until the ASC cancels the company’s registration. Once a company is deregistered, it ceases to exist.
[sections 601AA–601AB, 601AH]
Chapter 2A—Registering a company
Part 2A.1—What companies can be registered
112 Types of companies
Types of companies
(1) The following types of companies can be registered under this Law:
Proprietary companies Limited by shares Unlimited with share capital Public companies Limited by shares Limited by guarantee Unlimited with share capital No liability company
Note: Other types of companies that were previously allowed continue to exist under section 1413.
No liability companies
(2) A company may be registered as a no liability company only if:
(a) the company has a share capital; and
(b) the company’s constitution states that its sole objects are mining purposes; and
(c) the company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them.
Note 1: Section 9 defines mining purposes and minerals.
Note 2: Special provisions on no liability companies are found in the sections referred to in the following table:
No liability company provisions item topic sections 1 names 148, 156, 162 2 terms of issue of shares 254B 3 liability on partly-paid shares 254M 4 calls 254P-254R 5 winding up 477-478, 483, 514 6 registering a body as a company 610BA 7 transitional 1413
(3) A no liability company must not engage in activities that are outside its mining purposes objects.
(4) The directors of a no liability company must not:
(a) let the whole or proportion of a mine or claim on tribute; or
(b) make any contract for working any land on tribute;
unless:
(c) the letting or contract is approved by a special resolution; or
(d) no such letting or contract has been made within the period of 2 years immediately preceding the proposed letting or contract.
(5) An act or transaction is not invalid merely because of a contravention of subsection (3) or (4).
113 Proprietary companies
(1) A company must have no more than 50 non–employee shareholders if it is to:
(a) be registered as a proprietary company; or
(b) change to a proprietary company; or
(c) remain registered as a proprietary company.
Note: Proprietary companies have different financial reporting obligations depending on whether they are small proprietary companies or large proprietary companies (see section 45A and Part 2M.3).
(2) In applying subsection (1):
(a) count joint holders of a particular parcel of shares as 1 person; and
(b) an employee shareholder is:
(i) a shareholder who is an employee of the company or of a subsidiary of the company; or
(ii) a shareholder who was an employee of the company, or of a subsidiary of the company, when they became a shareholder.
(3) A proprietary company must not engage in any activity that would require the lodgment with the ASC of a prospectus under Part 7.12, except for an offer of its shares to:
(a) existing shareholders of the company; or
(b) employees of the company or of a subsidiary of the company.
(4) An act or transaction is not invalid merely because of a contravention of subsection (3).
Note: If a proprietary company contravenes this section, the ASC may require it to change to a public company (see section 165).
114 Minimum of 1 member
A company needs to have at least 1 member.
115 Restrictions on size of partnerships and associations
A person must not participate in the formation of a partnership or association which has as an object gain for itself or for any of its members and which either:
(a) has more than 20 members; or
(b) has more than the number of members it is allowed to have under an application order made by the Minister under Part 1.3;
unless the partnership or association is incorporated or formed under an Australian law.
Note: For the effect of a contravention of this section, see section 103.
116 Trade unions cannot be registered
A trade union cannot be registered under this Law.
Part 2A.2—How a company is registered
117 Applying for registration
Lodging application
(1) To register a company, a person must lodge an application with the ASC.
Note: For the types of companies that can be registered, see section 112.
Contents of the application
(2) The application must state the following:
(a) the type of company that is proposed to be registered under the Corporations Law of this jurisdiction
(b) the company’s proposed name (unless the ACN is to be used in its name)
(c) the name and address of each person who consents to become a member
(d) the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a director
(e) the present given and family name, all former given and family names and the date and place of birth of each person who consents in writing to become a company secretary
(f) the address of each person who consents in writing to become a director or company secretary
(g) the address of the company’s proposed registered office
(h) for a public company—the proposed opening hours of its registered office (if they are not the standard opening hours)
(j) the address of the company’s proposed principal place of business (if it is not the address of the proposed registered office)
(k) for a company limited by shares or an unlimited company—the following:
(i) the number, class and nominal value of the shares that each member referred to in paragraph (c) agrees in writing to take up
(ii) the amount (if any) paid, taken to be paid or due and payable on the issue of each share
(l) for a public company that is limited by shares or is an unlimited company, if shares will be issued for non-cash consideration—the prescribed particulars about the issue of the shares, unless the shares will be issued under a written contract and a copy of the contract is lodged with the application
(m) for a company limited by guarantee—the proposed amount of the guarantee that each member agrees to in writing.
Note 1: Paragraph (b)—sections 147 and 152 deal with the availability and reservation of names.
Note 2: Paragraph (f)—the address that must be stated is usually the residential address, although an alternative address can sometimes be stated instead (see section 242AA).
Note 3: Paragraph (g)—if the company is not to be the occupier of premises at the address of its registered office, the application must state that the occupier has consented to the address being specified in the application and has not withdrawn that consent (see section 100).
Note 4: Paragraph (h)—for standard opening hours, see section 9.
(3) If the company is to be a public company and is to have a constitution on registration, a copy of the constitution must be lodged with the application.
(4) The application must be in the prescribed form.
(5) An applicant must have the consents and agreements referred to in subsection (2) when the application is lodged. After the company is registered, the applicant must give the consents and agreements to the company. The company must keep the consents and agreements.
118 ASC gives company ACN, registers company and issues certificate
Registration
(1) If an application is lodged under section 117, the ASC may:
(a) give the company an ACN; and
(b) register the company; and
(c) issue a certificate that states:
(i) the company’s name; and
(ii) the company’s ACN; and
(iii) the company’s type; and
(iv) that the company is registered as a company under the Corporations Law of this jurisdiction; and
(v) the date of registration.
Note: For the evidentiary value of a certificate of registration, see subsection 1274(7A).
ASC must keep record of registration
(2) The ASC must keep a record of the registration. Subsections 1274(2) and (5) apply to the record as if it were a document lodged with the ASC.
119 Company comes into existence on registration
A company comes into existence as a body corporate at the beginning of the day on which it is registered. The company’s name is the name specified in the certificate of registration.
Note: The company remains in existence until it is deregistered (see Chapter 5A).
120 Members, directors and company secretary of a company
(1) A person becomes a member, director or company secretary of a company on registration if the person is specified in the application with their consent as a proposed member, director or company secretary of the company.
(2) The shares to be taken up by the members as specified in the application are taken to be issued to the members on registration of the company. The shares have the nominal value specified for them in the application.
Note: A member’s name must be entered in the register of members (see section 169).
121 Registered office
The address specified in the application for registration for the company’s proposed registered office becomes the address of the company’s registered office on registration.
122 Expenses incurred in promoting and setting up company
The expenses incurred before registration in promoting and setting up a company may be paid out of the company’s assets.
123 Company may have common seal
(1) A company may have a common seal. If a company does have a common seal, the company must set out on it:
(a) for a company that has its ACN in its name—the company’s name; or
(b) otherwise—the company’s name, the expression “Australian Company Number” and the company’s ACN.
Note 1: A company may make contracts and execute documents without using a seal (see sections 126 and 127).
Note 2: For abbreviations that can be used on a seal, see section 149.
(2) A company may have a duplicate common seal. The duplicate must be a copy of the common seal with the words “duplicate seal”, “share seal” or “certificate seal” added.
(3) A person must not use, or authorise the use of, a seal that purports to be the common seal of a company or a duplicate if the seal does not comply with the requirements set out in subsection (1) or (2).
Chapter 2B—Basic features of a company
Part 2B.1—Company powers and how they are exercised
124 Legal capacity and powers of a company
(1) A company has the legal capacity and powers of an individual both in and outside this jurisdiction. A company also has all the powers of a body corporate, including the power to:
(a) issue and cancel shares in the company
(b) issue debentures
(c) grant options over unissued shares in the company
(d) distribute any of the company’s property among the members, in kind or otherwise
(e) give security by charging uncalled capital
(f) grant a floating charge over the company’s property
(g) arrange for the company to be registered or recognised as a body corporate in any place outside this jurisdiction
(h) do anything that it is authorised to do by any other law (including a law of a foreign country).
A company limited by guarantee does not have the power to issue shares.
Note: For a company’s power to issue bonus, partly–paid, preference and redeemable preference shares, see section 254A.
(2) A company’s legal capacity to do something is not affected by the fact that the company’s interests are not, or would not be, served by doing it.
125 Constitution may limit powers and set out objects
(1) If a company has a constitution, it may contain an express restriction on, or a prohibition of, the company’s exercise of any of its powers. The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company’s constitution.
(2) If a company has a constitution, it may set out the company’s objects. An act of the company is not invalid merely because it is contrary to or beyond any objects in the company’s constitution.
126 Agent exercising a company’s power to make contracts
(1) A company’s power to make, vary, ratify or discharge a contract may be exercised by an individual acting with the company’s express or implied authority and on behalf of the company. The power may be exercised without using a common seal.
(2) This section does not affect the operation of a law that requires a particular procedure to be complied with in relation to the contract.
127 Execution of documents (including deeds) by the company itself
(1) A company may execute a document without using a common seal if the document is signed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.
(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:
(a) 2 directors of the company; or
(b) a director and a company secretary of the company; or
(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.
Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.
(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).
(4) This section does not limit the ways in which a company may execute a document (including a deed).
Part 2B.2—Assumptions people dealing with companies are entitled to make
128 Entitlement to make assumptions
(1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
(2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
(3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings.
(4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.
Repeal the definition, substitute:
company means a company incorporated, or taken to be incorporated, under the Corporations Law.
40 Subsection 3(1) (definition of registered body)
Omit “363”, substitute “601CX”.
41 Subsection 9(2)
Omit “each of 2 directors of the company who reside in Australia”, substitute “a director of the company who resides in Australia”.
42 Subsection 9(3)
Omit “the last address of the office of the liquidator notice of which has been lodged under the Corporations Law”, substitute “the address of the liquidator’s office in the most recent notice of that address lodged under the Corporations Law”.
43 After subsection 9(4)
Insert:
(4A) If an administrator of a company has been appointed, a process, order or document may be served on the company by leaving it at, or by sending it by post to, the address of the administrator in the most recent notice of that address lodged under the Corporations Law.
44 Subsection 9(9)
Omit “Sections 220 and 363”, substitute “Subsections 109X(1) and (2) and section 601CX”.
45 Paragraph 9(10)(a)
Omit “in the way provided in subsection 220(2)”, substitute “according to Part 2B.5”.
46 Paragraph 9(10)(b)
Omit “in the way provided in subsection 363(2)”, substitute “according to subsection 601CX(2)”.
47 Subsection 9(11) (definition of registered foreign company)
Omit “363”, substitute “601CX”.
48 Paragraph 10(3)(a)
Omit “body corporate’s principal office or principal place of business”, substitute “head office, a registered office or the principal place of business of the body corporate”.
49 Paragraph 10(3)(b)
Omit “principal” (twice occurring).
Schedule 5—Amendments in relation to nominal value and share capital reductions
Corporations Law
1 Paragraph 117(2)(k)
Repeal the paragraph, substitute:
(k) for a company limited by shares or an unlimited company—the following:
(i) the number and class of shares each member agrees in writing to take up
(ii) the amount (if any) each member agrees in writing to pay for each share
(iii) if that amount is not to be paid in full on registration— the amount (if any) each member agrees in writing to be unpaid on each share
2 Subsection 120(2)
Omit “The shares have the nominal value specified for them in the application.”.
3 Table in section 141
Omit item 41.
4 Subsection 162(4)
Repeal the subsection, substitute:
(4) A special resolution to change an unlimited company that has share capital to a company limited by shares may also provide that a specified portion of its uncalled share capital may only be called up if the company becomes an externally-administered body corporate.
5 Paragraphs 163(3)(a), (b) and (c)
Repeal the paragraphs, substitute:
(a) that the company has prepared a list that sets out the following details about each person to whom the shares will be issued:
(i) name and address
(ii) the number and class of shares the person will take up
(iii) the amount (if any) the person will pay for the shares
(iv) the amount (if any) that will be unpaid on the shares; and
(b) the number and class of shares those persons will take up; and
(c) the amount (if any) those persons will pay for the shares; and
(ca) theamount (if any) that will be unpaid on the shares; and
6 After subsection 169(4)
Add:
(5) The register does not have to show the amount unpaid on the shares (see paragraph (1)(f)) if:
(a) all of the company’s shares were issued before Schedule 5 of the Company Law Review Act 1998 commenced; and
(b) the register continues to show amount of unpaid par value for the shares as they were immediately before that commencement.
7 Section 254AA
Repeal the section.
8 At the end of subsection 254A(1)
Add:
Note 3: On the issue of a bonus share there need not be any increase in the company’s share capital.
9 At the end of subsection 254B(1)
Add:
Note 4: The company cannot issue par value shares (see section 254C) or bearer shares (see section 254F).
10 Sections 254CA, 254CB and 254CC
Repeal the sections, substitute:
254C No par value shares
Shares of a company have no par value.
Note: Sections 1444-1449 contain application and transitional provisions that deal with the introduction of no par value shares. See also subsection 169(4).
11 Section 254H
Repeal the section, substitute:
254H Resolution to convert shares into larger or smaller number
(1) A company may convert all or any of its shares into a larger or smaller number of shares by resolution passed at a general meeting.
Note: The variation of class rights provisions (sections 246B-246G) may apply to the conversion.
(2) The conversion takes effect on:
(a) the day the resolution is passed; or
(b) a later date specified in the resolution.
(3) Any amount unpaid on shares being converted is to be divided equally among the replacement shares.
(4) The company must lodge a copy of the resolution with the ASC within 1 month after it is passed.
12 Section 254K
Repeal the section, substitute:
254K Other requirements about redemption
A company may only redeem redeemable preference shares:
(a) if the shares are fully paid-up; and
(b) out of profits or the proceeds of a new issue of shares made for the purpose of the redemption.
Note: For a director’s duty to prevent insolvent trading on redeeming redeemable preference shares, see section 588G.
13 Section 254S
Repeal the section, substitute:
254S Capitalisation of profits
A company may capitalise profits. The capitalisation need not be accompanied by the issue of shares.
14 Section 254T
Repeal the section, substitute:
254T Dividends to be paid out of profits
A dividend may only be paid out of profits of the company.
Note: For a director’s duty to prevent insolvent trading on payment of dividends, see section 588G.
15 Paragraphs 254X(1)(c) and (d)
Repeal the paragraphs, substitute:
(c) the amount (if any) paid, or agreed to be considered as paid, on each of those shares; and
(d) the amount unpaid (if any) on each of those shares; and
16 Paragraph 254Y(a)
Omit “, and nominal value,”.
17 After the heading to Part 2J.1 and before Division 1 of that Part
Insert:
256A Purpose
This Part states the rules to be followed by a company for reductions in share capital and for share buy-backs. The rules are designed to protect the interests of shareholders and creditors by:
(a) addressing the risk of these transactions leading to the company’s insolvency
(b) seeking to ensure fairness between the company’s shareholders
(c) requiring the company to disclose all material information.
18 Sections 256A to 256F (inclusive)
Repeal the sections, substitute:
256B Company may make reduction not otherwise authorised
(1) A company may reduce its share capital in a way that is not otherwise authorised by law if the reduction:
(a) is fair and reasonable to the company’s shareholders as a whole; and
(b) does not materially prejudice the company’s ability to pay its creditors; and
(c) is approved by shareholders under section 256C.
A cancellation of a share for no consideration is a reduction of share capital, but paragraph (b) does not apply to this kind of reduction.
Note 1: One of the ways in which a company might reduce its share capital is cancelling uncalled capital.
Note 2: Sections 258A-258F deal with some of the other situations in which reductions of share capital are authorised. Subsection 254K(2) authorises capital reductions involved in the redemption of redeemable preference shares and subsection 257A(2) authorises reductions involved in share buy-backs.
Note 3: For a director’s duty to prevent insolvent trading on reductions of share capital, see section 588G.
(2) The reduction is either an equal reduction or a selective reduction. The reduction is an equal reduction if:
(a) it relates only to ordinary shares; and
(b) it applies to each holder of ordinary shares in proportion to the number of ordinary shares they hold; and
(c) the terms of the reduction are the same for each holder of ordinary shares.
Otherwise, the reduction is a selective reduction.
(3) In applying subsection (2), ignore differences in the terms of the reduction that are:
(a) attributable to the fact that shares have different accrued dividend entitlements; or
(b) attributable to the fact that shares have different amounts unpaid on them; or
(c) introduced solely to ensure that each shareholder is left with a whole number of shares.
256C Shareholder approval
Ordinary resolution required for equal reduction
(1) If the reduction is an equal reduction, it must be approved by a resolution passed at a general meeting of the company.
Special shareholder approval for selective reduction
(2) If the reduction is a selective reduction, it must be approved by either:
(a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; or
(b) a resolution agreed to, at a general meeting, by all ordinary shareholders.
If the reduction involves the cancellation of shares, the reduction must also be approved by a special resolution passed at a meeting of the shareholders whose shares are to be cancelled.
(3) The company must lodge with the ASC a copy of any resolution under subsection (2) within 14 days after it is passed. The company must not make the reduction until 14 days after lodgment.
Information to accompany the notice of meeting
(4) The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision on how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
Documents to be lodged with the ASC
(5) Before the notice of the meeting is sent to shareholders, the company must lodge with the ASC a copy of:
(a) the notice of the meeting; and
(b) any document relating to the reduction that will accompany the notice of the meeting sent to shareholders.
256D Consequences of failing to comply with section 256B
(1) The company must not make the reduction unless it complies with subsection 256B(1).
(2) If the company contravenes subsection (1):
(a) the contravention does not affect the validity of the reduction or of any contract or transaction connected with it; and
(b) the company is not guilty of an offence.
(3) Any person who is involved in a company’s contravention of subsection (1) contravenes this subsection.
Note: Subsection (3) is a civil penalty provision (see section 1317DA).
256E Signposts to other relevant provisions
The following table lists other provisions of this Law that are relevant to reductions in share capital.
| Other provisions relevant to reductions in share capital | ||||
| 1 | section 588G section 1317HA | liability of directors on insolvency Under the combined operation of these sections the directors may have to compensate the company if the company is, or becomes, insolvent when the company reduces its share capital. | ||
| 2 | section 1324 | injunctions to restrain contravention Under this section the Court may grant an injunction against conduct that constitutes or would constitute a contravention of this Law. | ||
| 3 | section 733 | ASC intervention (application to the Panel) Under this section the ASC may apply to the Corporations and Securities Panel for a declaration if it appears to the ASC that unacceptable circumstances have, or may have, occurred in relation to a reduction in share capital. If the Panel makes a declaration it may exercise a range of powers under section 734. | ||
| 4 | sections 1001A-1001D | continuous disclosure provisions Under these sections a disclosing entity is required to disclose information about its securities that is material and not generally available. | ||
| 5 | Chapter 2E | benefits to related parties to be disclosed Under this Chapter a financial benefit to a director or other related party that could adversely affect the interests of members of a public company, or diminish or endanger its resources, must be approved at a general meeting before it can be given. | ||
| 6 | section 125 | provisions in constitution This section deals with the way in which a company’s constitution may restrict the exercise of the company’s powers and the consequences of a failure to observe these restrictions. | ||
| 7 | sections 246B-246G | variation of class rights These sections deal with the variation of rights attached to a class of shares. This variation may be governed by the provisions of the company’s constitution. | ||
19 Section 257AA
Repeal the section.
20 Section 257A
Omit “(other than redeemable preference shares)”.
21 Items 6 and 7 in table in section 257J
Omit “256F”, substitute “256D”.
22 Sections 258E and 258F
Repeal the sections, substitute:
258E Other share cancellations
Any reduction in share capital involved in:
(a) the redemption of redeemable preference shares out of the proceeds of a new issue of shares made for the purpose of the redemption (see section 254K); or
(b) a company’s buying-back of its own shares under sections 257A to 257J if the shares are paid for out of share capital; or
(c) the cancellation of a share under subsection 667(3) or 1024E(7);
is authorised by this section.
258F Reductions because of lost capital
A company may reduce its share capital by cancelling any paid-up share capital that is lost or is not represented by available assets. This power does not apply if the company also cancels shares.
23 Item 6 in the table in section 348
Repeal the item, substitute:
6 issued shares The classes into which the shares are divided and for each class of share issued:
• the number of shares in the class
• the total amount paid up for the class
• the total amount unpaid for the class.
24 Paragraph 601BC(8)(c)
Repeal the paragraph.
25 After section 601BP
Insert:
601BQ References in pre-registration contracts and other documents to par value in existing contracts and documents
(1) This section applies in relation to a company registered under this Part for the purpose of interpreting and applying after registration:
(a) a contract entered into before the registration; or
(b) a trust deed or other document executed before the registration.
(2) A reference to the par value of a share is taken to be a reference to the par value of the share immediately before the registration, or the par value that the share would have had if it had been issued then.
(3) A reference to a right to a return of capital on a share is taken to be a reference to a right to a return of capital of a value equal to the amount paid before the registration in respect of the share’s par value, or the par value that the share would have had if it had been issued then.
(4) A reference to the aggregate par value of the company’s issued share capital is taken to be a reference to that aggregate as it existed immediately before the registration.
26 Subsection 1087(1)
Repeal the subsection, substitute:
(1) A certificate issued after the commencement of Schedule 5 to the Company Law Review Act 1998 specifying shares held by a member of a company must state:
(a) the name of the company and its jurisdiction of registration; and
(b) the class of the shares; and
(c) the unpaid on the shares.
27 Section 1317DA
Omit “Subsection 256F(3)”, substitute “Subsection 256D(3)”.
28 After paragraph 1324(1A)(b)
Insert:
; and (c) a company’s contravention of paragraph 256B(1)(a) (fair and reasonable test for share capital reduction) affects the interests of a member of the company.
29 Before subparagraph 1324(1A)(b)(i)
Insert:
(ia) para graph 256B(1)(b) (share capital reduction not to prejudice ability to pay creditors); or
30 Paragraph 1324(1B)(a)
After “contravention of”, insert “paragraph 256B(1)(a) or (b),”.
31 After Division 10 of Part 11.2
Insert:
Division 11—Changes resulting from Schedule 5 to the Company Law Review Act 1998
1443 Meaning of commencement, new Law and old Law
In this Division:
commencement means the commencement of Schedule 5 to the Company Law Review Act 1998.
new Law means this Law as in force after commencement.
old Law means this Law as in force immediately before commencement.
1444 Share capital—application of new no par value rule to shares issued before commencement
Section 254C of the new Law applies to shares issued before commencement as well as shares issued after commencement.
1445 Share capital—references to amount paid on shares issued before commencement
For the purposes of the operation of this Law after commencement in relation to a share issued before commencement:
(a) the amount paid on the share is the sum of all amounts paid to the company at any time for the share (but not including any premium); and
(b) the amount unpaid on the share is the difference between the issue price of the share (but not including any premium) and the amount paid on the share (see paragraph (a)).
1446 Share capital—transfer of money in share premium account and capital redemption reserve into the share capital account
Immediately after commencement, any amount standing to the credit of the company’s share premium account and capital redemption reserve becomes part of the company’s share capital.
1447 Share capital—use of amount standing to credit of share premium account
A company may use the amount standing to the credit of its share premium account immediately before commencement to:
(a) provide for the premium payable on redemption of debentures or redeemable preference shares issued before commencement; or
(b) write off:
(i) the preliminary expenses of the company incurred before commencement; or
(ii) expenses incurred, payments made, or discounts allowed, on or before commencement, in respect of any issue of shares in, or debentures of, the company.
Note: After commencement, a company will be able to issue bonus shares without transferring an amount to the share capital account (see section 254A).
1448 Share capital—calls on partly-paid shares
The liability of a shareholder for calls in respect of money unpaid on shares issued before commencement (whether on account of the par value of the shares or by way of premium) is not affected by the share ceasing to have a par value.
1449 Share capital—references in pre-commencement contracts and other documents to par value
(1) This section applies for the purpose of interpreting and applying after commencement:
(a) a contract entered into before commencement (including a company’s constitution); or
(b) a trust deed or other document executed before commencement.
(2) A reference to the par value of a share is taken to be a reference to:
(a) if the share is issued before commencement—the par value of the share immediately before commencement; or
(b) if the share is issued after commencement but shares of the same class were on issue immediately before commencement—the par value that the share would have had if it had been issued then; or
(c) if the share is issued after commencement and shares of the same class were not on issue immediately before commencement—the par value determined by the directors.
A reference to share premium is taken to be a reference to any residual share capital in relation to the share.
(3) A reference to a right to a return of capital on a share is taken to be a reference to a right to a return of capital of a value equal to the amount paid in respect of the share’s par value.
(4) A reference to the aggregate par value of the company’s issued share capital is taken to be a reference to that aggregate as it existed immediately before commencement and:
(a) increased to take account of the par value of any shares issued after commencement; and
(b) reduced to take account of the par value of any shares cancelled after commencement.
1450 Share capital—previous Law continues to apply to capital reductions initiated before commencement
If a company has called a meeting before commencement for the purpose of section 256A of the old Law to consider a special resolution for a reduction of its share capital, the old Law continues to apply to the reduction of capital.
32 Schedule 3
Repeal the item relating to subsection 256C(7).
Insurance Act 1973
33 Paragraph 22(2)(j)
Repeal, substitute:
(j) if the body corporate has a share capital—the body’s issued share capital and paid-up share capital;
Life Insurance Act 1995
34 Subsection 23(2)
Repeal the subsection, substitute:
(2) The reference in subsection (1) to the adjusted paid-up share capital of a life company is a reference to the amount of the company’s paid-up share capital represented by ordinary shares and irredeemable preference shares.
35 After section 233
Insert:
233A Transfer by life insurance company to statutory fund
This section authorises any share capital reduction that occurs because a life company appropriates or transfers an amount to a statutory fund established and maintained under this Act.
Note: Section 256B of the Corporations Law permits share capital reductions authorised by law to be carried out without shareholder approval.
36 Schedule (definition of share premium account)
Repeal the definition.
Pooled Development Funds Act 1992
37 Subsection 4(1) (paragraphs (a), (b) and (c) of the definition of shareholders’ funds)
Repeal the paragraphs, substitute:
(a) the amount of the company’s share capital; and
38 Paragraph 11(2)(c)
Repeal, substitute:
(c) the applicant’s issued share capital and paid-up share capital;
Notes to the Company Law Review Act 1998
Note 1
The Company Law Review Act 1998 as shown in this consolidation comprises Act No. 61, 1998 amended as indicated in the Tables below.
Table of Acts
| Act | Number and year | Date of Assent | Date of commencement | Application, saving or transitional provisions |
| Company Law Review Act 1998 | 61, 1998 | 29 June 1998 | Ss. 1 and 2: Royal Assent S. 3 and Schedules 1-4: 1 July 1998 (see Gazette 1998, No. S317) Schedule 5: 1 July 1998 (see Gazette 1998, No. S325) (see s. 2(5)): | |
| Taxation Laws Amendment (Company Law Review) Act 1998 | 63, 1998 | 29 June 1998 | Schedule 7: 1 July 1998 (see Gazette 1998, No. S325) (a) | — |
(a) The Company Law Review Act 1998 was amended by Schedule 7 only of the Taxation Laws Amendment (Company Law Review) Act 1998, subsection 2(1) of which provides as follows:
(1) Subject to this section, this Act commences on a day to be fixed by Proclamation.
Table of Amendments
| ad. = added or inserted am. = amended rep. = repealed rs. = repealed and substituted | |
| Provision affected | How affected |
| S. 2........................................... | am. No. 63, 1998 |
0
0
0