LAWS3100 Final: Constituting Companies (Chap 5)
Constituting companies (Chap 5)
Registering companies
- Companies are created through registration by ASIC and paying a fee. ASIC Form 201:
must include details of type of company, members, directors, secretary, registered office, internal
governance rules and name
- A person proposing to use a company to carry on a business has a choice of either
registering a new company themselves or acquiring an already registered company from another
person. Companies that have been registered for the purpose of being on-sold and that have not
traded prior to sale are often referred to as shelf companies.
The contents of the application form are prescribed by s117 of the Corporations Act 2001 (Cth). In
order to be able to complete the form, the person proposing to register the company will need to:
- Decide whether company will be proprietary company or public company
- Decide who will be member of company. Company must have at least one member (s114). The
members will also need to decide how to divide the shares. The member must agree in writing to
becoming members of company (s231).
- Decide who will be director of company. Proprietary company must have at least one director
living in au. Public company must have at least three directors, with at least two living in au
(s201A). Directors must agree in writing to being appointed as directors (s120)
- Decide who will be secretaries of company. Public company must have at least one secretary.
Secretary must agree to appointment (s204A)
-Choose address to be company’s registered office (s121)
-Decide whether the company’s internal arrangements will be governed by the replaceable rules
or whether a constitution replacing some or all those rules is to be adopted (Pt 2B.4)
- Choose a name for company (Pt 2B.6)
ASIC will register company and allocate its Australian Company Number (ACN) and issues a
registration certificate containing details of registration (s118).
Company names
-they can choose a particular name (rules set out in Pt 2B.6) or decide to use the company’s
ACN (a unique 9 digit number allocated to the company by ASIC on its registration) as its name.
Pt 2B.6: Identical names/names offensive to government/the Crown are prohibited. Limited public
companies must include “Ltd”, Proprietary company must include “Pty Ltd”. No liability companies
must include “No liability”/“NL” (s148)
-They can change their name after registration and it requires a special resolution of the
members (s157)
Company’s promoters:
The people who act to bring about the formation and registration of a company. The one who
undertakes to form a company with reference to a given project and to set it going, and who takes
the necessary steps to accomplish that purpose. The law treats them as being in a fiduciary
relationship with the company.
Pre-registration activities
It has no legal capacity to enter into contracts or to appoint agents to act on its behalf until the
company is registered.
Part 2B.3 S131 applies where a person enters into a contract on behalf of, or for the benefit of, a
company before it is registered. The company becomes bound by the contract and entitled to its
benefit if the company that is reasonably identified with it:
-is registered and
-Ratifies (adopts) the contract
within the time agreed by the parties.
Express ratification: when the company acknowledges that is its party to the contract, by
unequivocal words or conduct.
Implied ratification: not expressly acknowledge that it is party to the contract, but if it acts in a way
which can only be explained on the basis that it accepts the contract as binding. The key is that the
company acts in a way that hows to the other party that it intends to be bound by the contract.
(Aztech Science b Atlanta Aerospace (Woy Woy)
Internal governance rules (s134, 135, 141)= A set of arrangements (by-laws) agreed between
the members to govern the internal workings of the company
Typically deal with appointment, powers and removal of officers, meetings, classes of
shares, dividends, transfer of shares, inspection of books
These rules are found in:
the company’s Constitution, or the replaceable rules, or a combination of the two.
Section 134 of the Corporations Act:
‘A company’s internal management may be governed by provisions of this Act that apply to the
company as replaceable rules, by a constitution, or by a combination of both.’
Before July 1 1998, each company was required, on formation, to adopt:
a) A memorandum of association: the doc by which the original incorporators signalled their
intention to form a company. (name, amount of share capital and # of shares, that the liability of
the members was limited, and the names, addresses)
b) Articles of association: were its by-laws. They contained rules governing the things now the
subject of a company’s internal governance rules (appointment, removal and powers of
officers, meting procedures)
The Corporations Laws had a set of model articles of association for a company limited by shares;
referred to as Table A articles of association.
In 1998, it was decided to abolish these requirements and instead adopt a system of ‘replaceable
rules’. It made it easier for companies and their participants to locate all the rules impacting on a
particular act, and also to simplify and reduce the cost of forming companies, by reducing the
amount of paperwork that had to be prepared and lodged.
a) replaceable rules and constitutions
REPLACEABLE RULES
Replaceable rules was introduced in 1 July 1998.
The Corporations Act contains 42 RR, listed in s141.
If the company was formed after 1 July 1998, it can simply choose RR by not adopting a
constitution. If formed before, it can invoke the RR by repealing its existing memorandum and
articles of association. (s135)
S135(1): RR do not apply to single director/shareholder companies (= proprietary companies in
which the same person is both its sole director and its sole shareholder). Single director/
shareholder companies, therefore, have no internal governance unless they have adopted a
constitution.
Companies may elect to rely on some or all of the replaceable rules contained in the Corporations
Act
Replaceable rules (RRs) apply unless they are displaced or modified by a Constitution (s135)
Listed in s141 and scattered through Chapters 2D, 2F, 2G, 2H and 7 of the Act
There are rules covering: officers and employees, inspection of books, meetings, shares, and
share transfers
Most RRs are ‘default rules’ in that they can be displaced by the company in its constitution
Exception is s249X (proxies) which is mandatory for public companies
Section 203C is a RR for proprietary companies only (removal of directors by members)
Relying on the replaceable rules
Not all of the replaceable rules are suitable for all types of companies
Best for an unlisted company with more than 2 members.
Document Summary
Companies are created through registration by asic and paying a fee. Asic form 201: must include details of type of company, members, directors, secretary, registered office, internal governance rules and name registering a new company themselves or acquiring an already registered company from another person. Companies that have been registered for the purpose of being on-sold and that have not traded prior to sale are often referred to as shelf companies. A person proposing to use a company to carry on a business has a choice of either. The contents of the application form are prescribed by s117 of the corporations act 2001 (cth). In order to be able to complete the form, the person proposing to register the company will need to: Decide whether company will be proprietary company or public company. Decide who will be member of company. Company must have at least one member (s114). The members will also need to decide how to divide the shares.
