A History of Company Registration

What is a company?

A company is a legal entity formed by a group of individuals to engage in and operate a business, commercial or industrial, enterprise. The benefits of starting a company include income diversification, a strong correlation between effort and reward, creative freedom and flexibility. The disadvantages of starting a company include increased financial responsibility, increased legal liability, long hours, responsibility for employees and administrative staff, regulations, and tax issues. The history of companies is the history of individuals pursuing ambitions and the regulations that both promoted and complicated that pursuit.

Early General History

Prior to the 17th century, the first corporations were created in Europe as not-for-profit entities to build institutions, such as hospitals and universities, for the public good. They had constitutions detailing their duties overseen by the government. Straying outside these was punishable by law.
Only in the 17th century did making money become a major focus for corporations. Their wealth was used to finance European colonial expansion. Companies were used by the imperial powers to maintain draconian control of trade, resources and territory in Asia, Africa, and the Americas.
First in an ignoble line was the East India Company, set up by British merchant adventurers and granted the Royal Charter of Queen Elizabeth I in 1600. Partners combined their personal stock, turning it into company stock to create the world's first commercial corporation. It shipped out gold and silver to Asia in return for spices, textiles and luxury goods. The East India Company expanded into a vast enterprise, conquering India with a total monopoly on trade and all the territorial powers of a government. At its height, it ruled over a fifth of the world's population with a private army of a quarter of a million.

The Beginnings of Corporate ‘personhood’

Corporations as we know them came to being in Britain with an 1844 Act allowing them to define their own purpose. The power to control them thus passed from the government to the courts. In 1855, shareholders were awarded limited liability: their personal assets were protected from the consequences of their corporate behaviour.
In 1886 a landmark decision by a US court recognized the corporation as a 'natural person' under law. The 14th amendment to the Constitution: 'no state shall deprive any person of life, liberty or property' - adopted to protect emancipated slaves in the hostile South - was used to defend corporations and strike down regulations.
This was the beginnings of the concept known as ‘corporate personhood’, where a company is essentially an artificial person in that it is an entity separate from the individuals who own, manage, and support its operations.
A company has many of the same legal rights and responsibilities as a person does, like the ability to enter into contracts, the right to sue (or be sued), borrow money, pay taxes, own assets, and hire employees.

Neo-liberalism and Corporations

In the 1970s Milton Friedman and his 'Chicago School' economists developed ultra free-market ideas based on deregulation and privatization that harked back to the laissez-faire capitalism of the 19th century (hence the term 'neoliberalism'). This was to become the economic orthodoxy of globalization. In the early 1980s the full political resources of corporate America mobilized to regain control of the political agenda and the court system. Thatcher and Reagan, using the Chicago School ideas, made the world safe for corporations. They dismantled the social contract through tax cuts, ignoring unemployment, rolling back social welfare and increasing privatization.

A History of Australian Companies

Prior to 1991, the states had jurisdiction for company registration.

Though corporations law in Australia had historically closely followed developments in English law, it was mostly the concern of each separate state legislature, and there were significant differences in corporations legislation between the states.

Each state had a specific process and therefore a unique history of company registration.

For example, in New South Wales:

Company Regulation began in the Deeds Registration Branch of the Registrar General (established 1857) and involved authorising local and foreign companies to operate in New South Wales.

The Companies Act of 1874 placed the responsibility of company registration with the Registrar General until a Registrar of Joint Stock Companies was appointed.[i] The Registrar-General continued to hold this position until 1937.[ii] The Registrar maintained a register of Public Companies (later known as Liability Companies) from 1874, and under the No Liability Mining Companies Act 1881, was required to maintain a register of No Liability Mining Companies.

In 1955 the Registrar General established a separate Companies Branch.[iii] The Companies Act 1961 (Act No. 71 1961) established a Registrar of Companies.[iv] In preparation for this change the Companies Branch (1955-1962) was physically removed from the Registrar General's Department on 19 February 1962.[v] Company Regulation subsequently came under the control of the Companies Office (1962-1971) and Corporate Affairs Commission (1971-1990) before it ceased to be a state activity in 1991, when the Australian Securities Commission (a federal body), took over responsibility for company legislation and regulation.

On Jan 2nd 1991 the Australian Securities and Investments Commission, ASIC, was formed to replace the National Companies & Securities Commission and the states' corporate affairs commissions.  The states' files on companies that were currently registered at the end of 1990 were given to the new body, ASIC. 

The Corporations Act of 2001 brought even more changes to company regulations.

The Corporations Act 2001 (Cth) (the Corporations Act, or CA 2001) is an Act of the Commonwealth of Australia which sets out the laws dealing with business entities in Australia at federal and interstate level. It deals primarily with companies but also with other entities, such as partnerships and managed investment schemes. The Act is the primary basis of Australian corporations law.

The Corporate Law Economic Reform Program Act 2004 simplified the statute, which, at 3,354 pages, dwarfs those of other nations such as Sweden, whose corporations statute is less than 200 pages long.

The Corporations Act is the principal legislation regulating companies in Australia. It regulates matters such as the formation and operation of companies (in conjunction with a constitution that may be adopted by a company), duties of officers, takeovers and fundraising.

Most significantly it introduced Australian Company Numbers (ACNs).

ACNs are a unique nine-digit number issued by ASIC to every company registered under the Commonwealth Corporations Act 2001 as an identifier. The number is usually printed in three groups of three digits.

 It must be quoted on all correspondence and invoices issued by that company.

An ACN is not required on (at least): packaging and labelling, including envelopes and transport documents; advertisements which do not make a specific offer which is capable of being accepted (such as advertisements which only promote the company and its goods or services in general); credit cards and credit card vouchers; machine-generated receipts, including cash-register receipts; business cards and 'with compliments' slips; and items which are not documents (e.g., vehicles, television advertisements).

An ACN remains unchanged even if a company has a name change or is deregistered.

A similar system is used for non-company entities such as trusts, and for foreign companies.

Prior to the introduction of the 9 digit ACN, company information was filed under the company name, which might vary from 1 to 80 characters. This is an inefficient way to run a filing system, and can lead to problems, particularly if two company names differ in one of the middle digits, for example: Strudle Pty Ltd and Stradle Pty Ltd.

Unique identifiers, like the ACN, help reduce fraud by firstly clearly differentiating companies and/or subsidiaries with similar names, since companies with similar names will tend to have completely different ACNs.

Also if a company changes its name for any reason, including phoenix company, the ACN remains the same.

The ACN is generated using an algorithm with the last digit being a check digit allowing the number to be verified.

The ABN is generated using an algorithm where the first two digits are check digits, see [1].

The last 9 digits of an ABN do not always comply with the ASIC ACN algorithm, for example the Australian Tax Office ABN 51 824 753 556.

There are a number of countries who have versions of this system, including Cambodia, Canada, with CA identification numbers for textile dealers, Brazil, with CNPJ, the UK, with Registered numbers, and the US, with Registered Identification Numbers.

Furthermore, when GST was introduced, the ACN was incorporated into the process. A company's Australian Business Number (ABN) frequently includes the ACN as the last nine digits.[3] The ABN indicates that a person, trust or company is registered with the Australian Business Register (ABR). The ABR facilitates and streamlines many Australian business-to-government and government-to-business processes, such as Australian Tax Office transactions involving the collection and remittance of the Goods and Services Tax (GST).

What is GST?

Goods and services tax (GST) is a tax of 10% on the sale (supply) of most goods and services consumed in Australia. In general, an organisation that is required by law to 'register' for GST purposes:
• is required to pay GST to the Australian Taxation Office (ATO) if it sells something (ie, goods, services), and
• can claim an 'input tax credit' from the ATO for the amount of GST included in the price of goods and services it purchases.
Your organisation may be required by tax laws to pay GST on any goods and services it supplies.
For further information see the ATO website.

Types of Companies

As discussed, according to the Corporations Act 2001, a company is a legal entity which: 
•    can perform all the functions of a body corporate
•    can sue and be sued
•    has perpetual succession
•    can acquire, hold and sell property

A company's name must indicate its legal status. That is, if it is a proprietary company, then the word ‘Proprietary' or the abbreviation ‘Pty' must be included in the name, and if the liability of the company is limited, the word ‘Limited' or the abbreviation ‘Ltd' must appear at the end of its name.
The following are the types of company forms most frequently encountered:

Proprietary Limited Company

A proprietary limited company is a form of privately held company within Australia that is commonly used for conducting business. The minimum requirement to establish a company is that there must be a minimum of one director and one shareholder.  According to the Corporations Act 2001 (Cth) a proprietary company cannot have more than 50 non-employee shareholders or engage in fundraising or selling its shares to the public.

At least one of the directors needs to reside within Australia and be over the age of 18 years.

There are large proprietary companies and small proprietary companies. A proprietary company is judged to be large if it satisfies at least two of the following criteria: 
•    Annual revenues of  $10 million or more
•    Assets of $5 million or more
•    50 or more employees
Large proprietary companies are required to lodge their annual accounts with the ASIC. However, companies can often find ways of avoiding this requirement.

Public Companies

Public companies are permitted by law to raise money from the public by offering their shares for sale, usually listing them on the share market. The people who purchase these shares are called shareholders. You can recognise a public company because it must put the word ‘Limited’ or the abbreviation ‘Ltd’ after its name.
Public companies must have a minimum of three directors and at least one secretary. Two of the directors and the secretary are required to be residents of Australia.

Proprietary Companies – Limited by Shares

These are usually smaller than a public company and generally are referred to as private companies or shelf companies. There can be between one and fifty shareholders, yet raising money by selling shares to the public is not permitted. Being ‘Limited by Shares’ literally means that the liability is limited to the value of the shares of the company.
Small businesses predominately use a private company for their trading as a means to identify and differentiate their brand from their competitors.
There is a requirement for a minimum of one director and one shareholder.  At least one of the directors must reside in Australia. According to Corporations Act 2001 section 204A, a secretary is not required any longer.

Proprietary Companies – Limited by Guarantee

A company ‘Limited by Guarantee’ is often the preferred structure used by sports clubs who are ‘non-trading’ businesses. The shareholders must ‘Guarantee’ in writing the amount they are willing to contribute to the company should the company be unable to meet its debts.

Special Purpose Companies – SMSF Trustee

There are times where there is a requirement for a special type of company to be used for a specific purpose. One type of special purpose company is a Self Managed Superannuation Fund Trustee company. For this to be classed as a special purpose company, a provision within the company’s constitution needs to be included and upon registration of the company, ASIC needs to be notified that the company’s sole purpose is to act as the trustee of the SMSF

Main Differences between Public and Private Australian Companies

Executive and shareholder limits

Proprietary companies

Proprietary companies must have at least one shareholder but no more than 50 non-employee shareholders. These are the company owners. It must have at least one director. While it’s not necessary, you may also choose to have a company secretary. While there must be a registered office, the proprietary company doesn’t have to open it to the public.

Public companies

A public company must also have at least one shareholder, but there’s no upper limit to how many shareholders it can have. It’s common for a company to shift from being proprietary to public because it has more than 50 shareholders. Most companies choose to become a small unlisted public company in that situation.
A public company must have at least three directors, two of which must be ordinarily resident in Australia. It also needs at least one company secretary and a registered office that is available to the public during certain hours.

Ability to raise capital

Proprietary companies

A proprietary company can’t do any fundraising activities that need a prospectus. They can only offer their own shares to existing shareholders or their employees. Usually, proprietary companies raise money by accessing credit from financial institutions or are funded by their directors.
The directors of a proprietary company may refuse to register a transfer of shares in the company for any reason. This is why proprietary companies are also known as private companies, and one of the reasons why families often choose this structure – it allows them to keep control over the company’s ownership.

Public companies

Any public company, whether listed or unlisted, can raise capital by issuing shares to the public. The Corporations Act 2001 does have a number of disclosure requirements that must be made to investors when the company is fundraising. Typically, these are included in a prospectus. As disclosure documents need to be lodged with ASIC, it’s strongly advised that you get professional assistance in preparing them.

Disclosure requirements

Proprietary companies

A large proprietary company must lodge financial statements, an annual director’s report and audited accounts with ASIC unless it has an exemption. Some small proprietary companies may also need to do so but are more likely to be exempt.

Public companies

Public companies of every size must also disclose their financial statements, directors’ report and audited accounts. They must also:
•    provide those reports to their shareholders
•    make their constitution available to their shareholders
•    hold an Annual General Meeting
•    maintain a share register
If the public company is listed, they must also give their shareholders 28 days notice of their AGM and make their remuneration report available.

Liability

Proprietary companies

Proprietary companies are either limited by shares or by unlimited share capital. The former means that shareholders are only liable for the nominal value of their shares, while the latter means that there is no limit placed on their liability.

Public companies

Public companies vary in the extent of their liability depending on which of these four forms the company takes:
1.    Public companies limited by shares: Shareholders are only liable for the nominal value of their shares.
2.    Public companies limited by guarantee: Shareholders are limited by a specific amount that they are willing to contribute if the company is wound up.
3.    Unlimited public companies with a share capital: Shareholders’ liability is not limited.
4.    No liability public companies: This applies only to mining companies who meet certain benchmarks.
Most small proprietary companies are limited by shares and will have ‘Ltd’ after their business name to indicate their status.

How can Company123 register my company for me?

We are an ASIC registered agent, agent no. 34511.
ASIC registered agents can lodge documents including company registrations on behalf of third parties.
We are also an ASIC accredited software provider. This means we have our own direct electronic link to ASIC, allowing us to lodge your registration at any time of day, any day of the week.

To get started with your company registration, fill in our online form.
For some more information on the registration process see the ASIC website.

What costs are involved in the registration of a company?

The total fee is $532 which includes all government fees, our service fee and GST. The ASIC registration fee is $495 and our service fee, inclusive of GST, is just $37.

For $37 you get the convenience of being able to lodge your company 24/7 from the comfort of your own home/office, and also having all your company documentation such as consents, share registry, opening minutes etc automatically prepared for you.

ASIC also charge an annual fee on the anniversary date of registration, ie if you registered a company today the annual fee would be payable in one years time. Annual fees vary depending on the type of company, they can be viewed on our ASIC fee page.

Optional extras include:
For an extra $50, Company123 as registered tax agents will apply for ABN, TFN and GST for your company.
For an optional $55 extra Company123 will also print, bind and deliver your documentation.