Public Company Limited by Guarantee


Which kind of company is the information on this page about?

The questions and answers on this page have been specifically prepared for the kind of company called a "Public Company Limited by Guarantee", which is a not-for-profit company.

You can read the questions and answers about the proprietary limited company (known as a "Pty Ltd" company) that Cleardocs provides, here.

Although, some of the questions and answers are the same for the two companies, it is essential that you read the page that is about the company you are interested in.

What are the purposes of a "Public Company Limited by Guarantee"?

The main purposes of a "Public Company Limited by Guarantee" are to be either:

  • a charity that aims to be exempt from paying income tax. For the requirements of being a charity, click here.
  • a "not-for-profit" organisation that is not a charity but which can self-assess as exempt from paying income tax. Examples of relevant organisations include: a community service organisation, a sporting organisation, an educational institution, a religious organisation — for the full list, click here.

Are other structures suitable for not-for-profit purposes?

Yes, there are various other types of structures that are suitable for different kinds of not-for-profit purposes. For example, as well as the "Public Company Limited by Guarantee" described on this page, the other structures include:

  • a "not-for-profit Pty Ltd company". Cleardocs provides this type of company already, you can read about them here. They are often used as the trustee of a Public or a Private Ancillary Fund (commonly known as a "PuAF" or a "PAF"). Ancillary Funds provide a tax advantageous structure for people who wish to donate money to entities which are recognised as "deductible gift recipients". You can read more about Ancillary Funds (Public and Private), here and more about "deductible gift recipients" below ; and
  • incorporated associations. These are available in most states and territories (but not through Cleardocs).

If you are setting up a not-for-profit company, then you need to get legal advice about the best structure to suit the company's purposes. Cleardocs is not able to give you that advice. However, you can ring our lawyers at Maddocks to arrange a quote for the firm to give you that advice. If you would like to call Maddocks, then please call us on 1300 307 343 and we will put you in contact with the relevant people at Maddocks.

How does the structure of a "Public Company Limited by Guarantee" differ from a "Pty Ltd" company?

A "Public Company Limited by Guarantee" differs from a "Pty Ltd" company in the ways shown in the table:

Pty Ltd company

Available through Cleardocs from here

Public Company Limited by Guarantee

Available through Cleardocs from here

Purpose

The company does not need to state its objects in the company Constitution.

The company must state its objects in the company Constitution. Those objects must be either to be:

  • a charity that aims to be exempt from paying income tax. For the requirements of being a charity, click here.
  • a not-for-profit organisation that is not a charity but which can self-assess as income tax exempt. Examples of relevant organisations include: a community service organisation, a sporting organisation, an educational institution, a religious organisation — for the full list, click here.

Use of income

The company is not limited in how it uses its income.

All the company's income must be applied toward the company's objects.

Shares

Shares must be issued in the capital of the company.

The company has no shares.

Shareholder liability if company is wound up

Shareholder liability when the company is wound up is limited to the price paid on the member's shares. If that full amount has been paid on each share, then the shareholder is not liable for any further amounts.

Each member "guarantees" to the company that if the company is wound up and its debts exceed its liquidated assets, then they will pay up to a certain amount each. Their liability is limited to the amount of their guarantee.

When you order a Public Company Limited by Guarantee from Cleardocs, you set the amount of the guarantee that each member gives. In most companies, the amount is nominal, for example $10.

Profits

Profits can be distributed to the company's shareholders.

Profits cannot be distributed to the company's members. Instead, they must be applied toward the company's objects.

Number of directors

The company can have:

  • from one director to 20 directors;
  • from one shareholder to 50 shareholders (who aren't employees of the company). However, the company may have more shareholders who are employees of the company; and
  • The company may appoint a secretary, but there is no requirement to do so. There is no upper limit on the number of secretaries the company may have.

The directors and secretaries must be ordinarily resident in Australia.

The company must have:

  • at least 3 directors;
  • at least one secretary;
  • at least one member.
  • There is no upper limit on the number of directors, secretaries or members. It is advisable to limit the number of directors and secretaries to 10 and the number of members to 50.

The directors and secretaries must be ordinarily resident in Australia.

What is the difference between a not-for-profit proprietary limited company and a public company limited by guarantee?

Cleardocs offers both:

Both have been developed for use by not-for-profit entities.

The Not-for-profit Pty Ltd Company Registration has been developed mainly for use as the trustee of an ancillary fund (whether a public or private ancillary fund). It can also be used for other not-for-profit purposes, such as a charity if it seeks and obtains charity status. You can read more about this here.

The Public Company Limited by Guarantee has been developed for use as a not-for-profit organisation, which may also seek charity status. You can read more about this here.

The main differences between the companies are:

  • the Not-for-profit Pty Ltd Company Registration product establishes a proprietary company, limited by shares. It has a share capital as per any other proprietary limited company, that is, its funding comes from shareholders and, in limited circumstances, the public. Given the entity is not-for-profit, it is not permitted to distribute profits or assets to its shareholders. The company must comply with all obligations of proprietary companies under the Corporations Act 2001 (Cth).
  • the Public Company Limited by Guarantee product establishes a public company, limited by guarantee. The company does not have a share capital and its funding comes from the public. The limit of a member's liability is called a 'guarantee' — a nominal amount the member agrees to pay in the event that the company is wound up. It is not permitted to distribute profits or assets to its members. The company must comply with all obligations of public companies under the Corporations Act 2001 (Cth).

There are various other types of structures that may also be suitable for not-for-profit entities, such as incorporated associations. You must seek your own legal advice about what kind of structure is best for you.

What is it that makes a "Public Company Limited by Guarantee" not-for-profit?

A "Public Company Limited by Guarantee" is considered not-for-profit because:

  • its profits can be used only to further the company's objects that are set out in its Constitution — that is, the profits cannot be distributed to its members; and
  • when the company is wound up, its assets must not be distributed to the members. Instead, the company's assets must be given to an entity with the same or similar objects to the company.

What's the difference between a not-for-profit company and a charity?

A "not-for-profit Public Company Limited by Guarantee" can be any of:

  • a non-charitable company, see below;
  • a non-charitable company, see below, with "deductible gift recipient" (DGR) status, see below;
  • a charitable company; or
  • a charitable company, see below with DGR status, see below.

What is a charity?

A charity is an entity:

  • that is not-for-profit;
  • all of the purposes of which are charitable purposes for the 'public benefit', or incidental or ancillary to, and in furtherance or in aid of, such purposes;
  • which does not have any 'disqualifying purposes'; and
  • which is not an individual, a political party or a government entity.

The entity can be (but doesn't have to be) a company limited by guarantee.

However, for an entity to enjoy the tax benefits of being a charity, it must be:

  • registered as a charity with the Australian Charities and Not-for-profits Commission; and
  • endorsed by the ATO for tax concessions.

For endorsement as a charity, the company must be established for one of the following purposes:

  • advancing health;
  • advancing education;
  • advancing social or public welfare;
  • advancing religion;
  • advancing culture;
  • promoting reconciliation, mutual respect and tolerance between groups of individuals in Australia;
  • promoting or protecting human rights;
  • advancing the security or safety of Australia or the Australian public;
  • preventing or relieving the suffering of animals;
  • advancing the natural environment;
  • any other purpose beneficial to the general public that may be reasonably regarded as analogous to, or within the spirit of, the above purposes; and
  • promoting or opposing a change to any matter established by law, policy or practice in the Commonwealth, a state, a territory or another country, in furtherance or protection of one or more of the above purposes.

What is "DGR status" or "Deductible Gift Recipient status"?

If an entity has "Deductible Gift Recipient" status then anyone who donates money to it can claim their donation as a tax deduction.

For the company to have "deductible gift recipient" status, it must:

  • fit within one of the categories set out in subdivision 30-15 of the Income Tax Assessment Act 1997; and
  • meet certain other requirements.

You can read about the categories and requirements on the ATO website.

You should seek legal advice on whether your company satisfies the requirements set out in the tax law.

What is a "charitable not-for-profit" company"?

A company is a "charitable not-for-profit" company if it meets the requirements of being a charity, see the above FALQ "What is a charity?"

A company that is going to be a charity cannot self-assess its income tax exempt status. Instead, the company must apply to the Australian Charities and Not-for-profits Commision (ACNC) and then to the ATO for endorsement as an income tax-exempt entity.

Due to those issues, if you order a "charitable not-for-profit" company through Cleardocs, you need to arrange for a lawyer to:

  • tailor the company's Constitution to meet the legal requirements in relation to the company's objectives; and
  • prepare the application to the ACNC (the ACNC can apply to the ATO for endorsement on behalf of the company).

If you arrange for that work to be performed by our legal advisers at Maddocks, then Maddocks will use Cleardocs to apply to ASIC to register the company. After that, your order for the company will show on your Cleardocs profile along with any other Cleardocs orders you have.

However, if you arrange for that work to be performed by another law firm, then that firm will need to lodge your application to register the company with ASIC.

What is a "non-charitable not-for-profit" company?

A company is a "non-charitable not-for-profit" company if:

  • it is not carried on for the profit or gain of members; and
  • its Constitution (or other governing document) prohibits the company from making distributions of any kind (money or property) to its members; but
  • the company does not carry on its business for charitable purposes.

These kinds of companies do not need to apply for endorsement as income tax exempt. Instead, they self-assess their status. However, before doing so they should seek legal advice to ensure the company fits into one of the required categories. Examples of relevant organisations include: a community service organisation, a sporting organisation, an educational institution, a religious organisation — for the full list, click here.

How do I use Cleardocs to register a "not-for-profit Public Company Limited by Guarantee"?

The information about registering a "not-for-profit Public Company Limited by Guarantee" through Cleardocs varies depending on whether the company is to be a charity. However, some of the information is the same for both kinds of company. The information is in the table below.

Registering a "not-for-profit Public Company Limited by Guarantee"

Non-charity

Charity

Preparing the company's Constitution and arranging for ASIC to review it

Because the company will be a public company, the law requires ASIC to review the company's Constitution.

For a non-charity company, Cleardocs prepares the Constitution and automatically sends an electronic copy to ASIC for review. All this is handled electronically as part of your application to register the company.

Due to the legal issues relating to a charity seeking to be income tax exempt, you need to arrange for a lawyer to:

  • tailor the company's Constitution to meet the legal requirements about its objectives; and
  • prepare the application to ACNC for registration as a charity and for endorsement by the ATO as income tax exempt (the ACNC will apply to the ATO on behalf of the company).

Using Cleardocs to electronically lodge the application to register the company with ASIC

You click a button on the Cleardocs website to lodge the application with ASIC.

If you arrange for the work referred to in the row above this one to be performed by our legal advisers at Maddocks, then Maddocks will use Cleardocs to apply to ASIC to register the company.

However, if you arrange for that work to be performed by another law firm, then that firm will need to lodge your application to register the company with ASIC.

Legal fees for applying for "Deductible Gift Recipient" status

Although this process is separate from the application to register the company and cannot be done through Cleardocs, you need to consider:

If the company wishes to apply for DGR status, it can select this within the application to the ACNC and the ACNC will apply to the ATO on the company's behalf.

Cleardocs fee to register the company

$275.00 (inc. GST)

Optional printing, binding and courier delivery anywhere in Australia fee

$49.50 (inc. GST)
This is not available if the company is to be a charity and you arrange for your own law firm to perform work.

ASIC fee

$387.00 (GST is not payable)

Legal fees for:

  • finalising Constitution; and
  • preparing application to the ACNC for registration as a charity (who will make the application to the ATO for the company to be endorsed as income tax exempt)

Nil because the work is not required.

If you use our legal advisers at Maddocks, you will need to get a quote from this firm.

Alternatively, you can arrange for any other law firm to perform the work. You will need to get a quote from this firm.

Total fee

Email document delivery = $662.00

Both email and hardcopy delivery = $711.50

Email document delivery = $662.00, plus the legal fees referred to above.

Both email and hardcopy delivery = $711.50, plus the legal fees referred to above.

Is the certificate of registration issued by Cleardocs sufficient to give to a bank?

Yes, the Certificate of Registration that Cleardocs receives electronically from ASIC and provides to you electronically is the original certificate. The only way ASIC provides its standard Certificates is electronically. The standard certificate is enough to open a bank account and is what most companies use.

Bank rejection? Occasionally when a Cleardocs customer is trying to set up a bank account, the bank rejects the certificate that the customer received from Cleardocs electronically and then printed and provided to the bank. A bank that does this — or at least, the relevant branch that does this — is several years out of date with ASIC's systems etc.

If a bank rejects your certificate and asks "for the original certificate", then the thing to do is to get the person at the bank to check the above information with ASIC. They can do that by:

  • calling ASIC on 1300 300 630;
  • when listening to the options, they should press 1, then 1 again; and
  • when they speak to the person at ASIC, they should explain that you registered the company through Cleardocs and the Certificate was provided in electronic form.

ASIC will explain things to the bank.

You might like to call ASIC on the number etc. above to confirm all this for yourself.

What reporting requirements apply to a "not-for-profit Public Company"?

The reporting requirements for a "not-for-profit Public Company" depend on its size. The reporting requirements are shown in the table:

Tier

Size of company limited by guarantee

Obligations

Tier 1

Annual consolidated revenue of less than $250,000.00

The company does not have to do any of the following (unless either ASIC or a member of the company directs it to do so):

  • prepare a financial report or have it audited;
  • prepare a directors' report; or
  • notify members of annual reports.

Tier 2

Annual (or consolidated) revenue of:

  • $250,000.00 or more; but
  • less than $1 million.

The company:

  • must prepare a financial report;
  • can choose to have its financial report "reviewed" (rather than audited);
  • must prepare a directors' report — although less is required in the report than is required for other public companies; and
  • must give annual reports to any member who chooses to receive them.

Tier 3

Annual (or consolidated) revenue of $1 million or more.

The company:

  • must prepare a financial report;
  • must have the financial report audited;
  • must prepare a directors' report — although less is required in the report than is required for other public companies; and
  • must give annual reports to members.

You can read more on ASIC's website about the reporting of obligations of a Company Limited by Guarantee.

What happens to the assets of the "not-for-profit Public Company" if the company is wound-up?

If a "not-for-profit Public Company" is wound up then its assets must be paid to another company with similar objects.

What is the liability of a member of a "not-for-profit Public Company" if the company is wound-up?

If a "not-for-profit Public Company" is wound up, then each member's liability to pay the company's debts that exceed its liquidated assets is limited to the amount the members have guaranteed to pay. When you order a Public Company Limited by Guarantee from Cleardocs, you set the amount of this guarantee. It is the same amount for each member. In most companies, the amount is nominal, for example $10.00.

Can the capital and profits of a "not-for-profit Public Company" be paid to the members?

No, a "not-for-profit Public Company" may not pay its capital or profits to its members. The members of the company may not receive a financial gain from their membership.

Instead, the company must use its capital, and any profits it makes, to carry out its objects.

What is a 'Public Officer'?

Under Australian taxation law, every company carrying on business or deriving property income in Australia must have a public officer (unless the company is specifically exempted).

The company must appoint a public officer within 3 months of the company:

  1. Commencing to carry on business; or
  2. First earning income in Australia.

The public officer must be at least 18 and must live in Australia.

The public officer is responsible for ensuring that the company pays the correct amount of tax.

If a company is in default, then the public officer is liable to pay any penalties. However, the public officer is not personally liable for payment of tax due by the company.

What does the 'directors' interests' refer to?

Under the Corporations Act 2001 (Cth), a director of a company who has an interest (perhaps a conflict of interest) in a matter that concerns the Company may give the other directors notice of the nature and extent of the interest.

The notice must state the nature and extent of the interest and be given at a director's meeting or to the other directors individually in writing.

Can the directors of a "not-for-profit Public Company" be paid for services or expenses?

Yes, the directors a "not-for-profit Public Company" can be paid for services they provide:

  • as a director — however, their remuneration must be on reasonable commercial terms and the board must first have both approved the amount and consented to the director providing those services; and
  • as an employee — as long as before the payment is made, the board approves the terms of the director's employment.

Also, the company can repay a director the cost of any expenses they incur:

  • for the company; or
  • in connection with performing their duties for the company.

What do I do if I want to add more directors in the future?

The initial director or directors can appoint more directors in the future — as follows:

  1. The new director must be at least 18 years old;
  2. The new director must consent to their appointment before they are appointed;
  3. The current directors must appoint the new director by recording the appointment and signing the record; and
  4. The company must then notify ASIC of the appointment by lodging an ASIC Form 484 within 28 days after the appointment. You can download the form from the ASIC website and lodge it with ASIC — see www.asic.gov.au

Does Cleardocs automatically register the company for an ABN and a TFN?

No, Cleardocs does not arrange the ABN and TFN. You can do that yourself at www.ato.gov.au or www.abr.gov.au.

Will the company be entitled to an ABN?

Companies incorporated through Cleardocs are incorporated under the Corporations Act 2001 in Australia — these companies are entitled to an ABN.

When should the company apply for an ABN?

ABNs are not compulsory. However, there are many good reasons to have one, for example, ABNs help:

  1. you to deal with the ATO; and
  2. you in dealing with other businesses when supplying goods or services to them, or when purchasing goods and services.

Also, you need an ABN to register for GST. Entities carrying on an enterprise in Australia with a GST turnover of $75,000.00 must register for GST.

More information can be found at www.abr.gov.au.