Company Registration

Is the certificate of registration issued by Cleardocs sufficient to give 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 A bank that does this — or at least, the relevant branch that does this — is several years out of date with ASIC's systems etc.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.

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

Yes, Cleardocs can arrange ABN, TFN and GST registrations for certain new and already established proprietary limited companies.

When should my company apply for an ABN?

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

  • to deal with the ATO; and
  • 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 must register for GST. More information can be found at ato.gov.au..

Will my company be entitled to an ABN?

Companies incorporated through Cleardocs are incorporated under the Corporations Act 2001 in Australia - these companies are generally eligible to apply for an ABN.

To obtain an ABN, your company must:

  • be able to demonstrate that the business structure is in place;
  • be carrying on an enterprise in Australia;
  • in the course of carrying on an enterprise, make supplies connected with the indirect tax zone or have undertaken sufficient activities to commence an enterprise; or
  • be a Corporations Act company.

More information on ABNs, including who is entitled to apply, is set out on the ATO's website.

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. Cleardocs recommends that your organisation seek advice on its specific GST obligations.

What is an ultimate holding company?

A company is an ultimate holding company of a wholly-owned group if it has a subsidiary and the company is not a subsidiary of another company. This means, the ultimate holding company owns or controls more than 50% of the shares in the subsidiary and can be referred to as the "controlling entity".

The key element is control. One company controls a second company if it has the capacity to determine the outcome of the decisions of the second company's financial and operating policies.

The ultimate holding company may have a number of subsidiaries.

What does the 'directors' interests' refer to?

Under the Corporations Act 2001, 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 my company be paid any fees or remuneration for their services?

Directors of a not-for-profit proprietary limited company cannot be paid fees for their services.

The directors can, however, be remunerated for travelling and other expenses they incur in relation to their duties as directors. The directors must approve any such payment before it is made.

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 in writing to their appointment before they are appointed;
  3. The new director must provide the company with their personal details – their full name, any former names, date and place of birth, and usual residential address;
  4. The current directors must appoint the new director by recording the appointment and signing the record – you can create the relevant minute or resolution through Cleardocs;
  5. 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; and
  6. The shareholders must confirm the appointment of the director within the time period required by the Constitution or the replaceable rules (whichever governs the company). For companies with a Cleardocs Constitution, this time period is 6 months. Read more about this here.

Can a trust be a shareholder?

No (but see next 2 questions). A trust cannot own shares in a company because the law says a trust is not a separate legal person. For example, the 'John Smith Family Trust' cannot own shares or any other property.

Even so, the trustee of a trust, in his, her or its capacity as trustee, is capable of owning shares and other property - see next question.

Can a trustee be a shareholder?

Yes, a trustee can own shares in a company - as long as you include the trustee's name and their capacity. For example:

'John Smith in his capacity as the trustee of the John Smith Family Trust'.

In this case, the trustee holds the shares in the company on trust for the beneficiaries of the trustee's own trust.

(The trust itself cannot own shares as it is not a legal entity.).

Can a corporate trustee be a shareholder?

Yes, a corporate trustee can own shares in a company - as long as you include the trustee's name and their capacity. For example:

'ABC Pty Ltd in its capacity as the trustee of the ABC Family Trust'

In this case, the trustee holds the shares in the company on trust for the beneficiaries of the trustee's own trust.

(The trust itself cannot own units as it is not a legal entity.)

Can the capital and profits of my company be directed to the members?

No. The income of the company must be applied solely towards the company's charitable purpose.

If I want to issue more shares in the future, how many should I create now?

The number of shares the company should issue depends on your individual circumstances. However, if you intend to incorporate a simple company, with you and maybe 1 or 2 others as directors, then generally a company will issue a nominal amount of shares, say 100 shares at $1.00 each.

The company can issue more shares to others as time progresses.

Can I issue preference shares under the Cleardocs Constitution? What should I bear in mind?

Yes, it is possible to issue preference shares under the Cleardocs Constitution — but you need to be careful and to seek professional advice.

The Cleardocs Constitution provides for a range of share classes which confer different rights and restrictions in different combinations. Those share classes include a form of redeemable preference share.

If you are considering registering a company with any form of restricted or preference shares, then you, the company, and the company's directors and shareholders, need to carefully consider the implications. For instance, the shares may be treated as debt provided to the company rather than capital, as is explained below.

The rights and restrictions attaching to shares will be important to, and are likely to be reviewed by, stakeholders such as:

  • Government regulators — who assess the company's debt and equity ratios, net asset position, cash needs and surplus liquid funds requirements and so on.
  • Banks and other financiers — who assess the company's financial position, and the implications of restricted or preference shares: on their security position; on the company's capacity to meet financial covenants; and on its capacity to meet repayment obligations.
  • Investors — who assess the impact of restricted or preferential shares (either already on issue on which will be issued to them) on:
    • their assessment of the risk associated with the investment;
    • dividend flow;
    • capital return; and
    • voting power.

What is a 'Public Officer'?

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

The company decides who acts as public officer in accordance with its Constitution. The Cleardocs Constitution provides that the secretary is the public officer, unless the directors decide otherwise.  

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

  • commencing to carry on business; or
  • first earning income in Australia.

If a company fails to appoint a public officer within the 3 month period, it is guilty of an offence for each day it does not have a public officer.

The public officer must be at least 18 and must live in Australia. They must also be capable of understanding the nature of their appointment.

The public officer deals with the ATO in relation to the company's tax affairs and 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.

Can I use the Cleardocs Company Registration Package if I do not intend to appoint a public officer?

No, you cannot use the Company Registration Package if you do not intend to appoint a public officer. When purchasing the package, you are required to indicate who will be the company's public officer. You cannot complete an order without nominating a public officer (who can be either an existing officer of the company or a third person).

Although there are circumstances in which a proprietary limited company does not need to appoint a public officer (for example, if the company obtains an exemption from the ATO), Maddocks advises that it is sensible to nominate a public officer at the time of registration to minimise non-compliance risk.

You should remember that:

  • it is a strict liability offence for a company to fail to appoint a public officer when required to do so (regardless of whether this is an inadvertent or deliberate failure);
  • a company is guilty of an offence each day on which it contravenes the requirement to appoint a public officer (that is, each day is a separate offence); and
  • the decision not to appoint a public officer does not excuse the company from non-compliance with taxation law, or from any penalty for refusal or failure to comply with taxation law.

The name of the public officer is not specified in the Cleardocs Constitution and Cleardocs does not notify ASIC of this appointment as part of the company registration process. The Cleardocs document package includes a 'Consent to Act as Public Officer' form and template notice to the ATO of the appointment. The Cleardocs customer is directed to arrange for:

  • the public officer to confirm their consent to act in writing;
  • the company to sign the notice of appointment; and
  • the company to provide the notice of appointment to the ATO.

Under the Cleardocs Constitution:

  • unless the company's directors decide otherwise, the company secretary is also the company's public officer; and.
  • the directors are required to appoint a public officer in accordance with Australian tax law.

What is a 'special purpose' company?

A special purpose company is a company which, like its name suggests, is set-up for a particular purpose. A special purpose company might be set-up solely to be the trustee of an SMSF. Or it might be set-up solely to pursue certain charitable purposes.

This product is a not-for-profit special purpose company. The requirements for a not-for-profit special purpose proprietary limited company are set out in section 3(d) of the Corporations (Review Fees) Regulations 2003 (regulations made under the Corporations Act 2001). These regulations provide that the constitution of a special purpose company:

  • requires the company to pursue charitable purposes only and to apply its income in promoting those purposes;
  • prohibits the company making distributions to its members and paying fees to its directors; and
  • requires its directors to approve all other payments the company makes to them.

ASIC has confirmed that the key requirement for creating a not-for-profit proprietary limited company is that the constitution of that company states that it has been created for a specific purpose: pursuing charitable purposes.

On a winding-up of a not-for-profit proprietary limited company, any assets which are left over after the company has paid its debts must be distributed to another entity with similar objectives to the not-for-profit company. The assets must not be distributed to the shareholders.

The company is a proprietary company, limited by shares: what makes it not-for-profit?

Ordinarily, companies which are established with share capital are 'for-profit'. The share structure allows the company to distribute profits and dividends to shareholders in proportion to their shareholding. When the company is wound-up the liability of the shareholders is limited to the amount they've paid for their shares.

The Cleardocs not-for-profit proprietary limited company is not-for-profit because its constitution:

  • requires the company to pursue charitable purposes only and to apply its income in promoting those purposes;
  • prohibits the company making distributions to its members and paying fees to its directors;
  • requires its directors to approve all other payments the company makes to them; and
  • must provide for winding-up distributions to be made to like-minded companies.

What is an Ancillary Fund?

Ancillary funds are funds endorsed by the Australian Taxation Office as income tax exempt, deductible gift recipients. Ancillary Funds may be Private Ancillary Funds, known as "PAFs"; or Public Ancillary Funds, known as "PuAFs".

Tax legislation specifies that Ancillary Funds are established and maintained under a will or instrument of trust for, among other things, the purpose of providing money, property or benefits to endorsed "deductible gift recipients" (known as "DGR").

PAFs use donations of businesses, families and individuals.

PuAFs seek donations from the public.

Both PAFs and PuAFs ned to be endorsed by the ATO in order to qualify for tax exemptions.

The key features of Ancillary Funds (both Private Ancillary Funds and Public Ancillary Funds) are:

  • the governing rules of the Ancillary Fund must set out and reflect that it is established as a not-for-profit entity;
  • the fund must fall within the category of deductible gift recipient for Ancillary Funds;
  • the fund must be established in, and must operate in, Australia; and
  • on the winding-up of a PAF or PuAF, its assets must not be distributed to members, but instead directed towards another entity with similar purposes.

Ancillary Funds must also have an investment strategy and must distribute certain minimum amounts of the fund's assets annually. There are also particular requirements for individuals who are trustee-directors of Ancillary Funds. For more information, read the Government's guidelines on Private Ancillary Funds here and Public Ancillary Funds here.

You should ensure that you have ongoing legal advice about the operations of your Ancillary Fund. There are a number of reasons for this, including:

  • guidelines about Ancillary Funds may change: the Commonwealth Treasurer has the power to make (and change) legislative guidelines about the establishment and maintenance of Ancillary Funds; and
  • penalties may apply if your Ancillary Fund is non-complying: the Commissioner of Taxation has the power to impose administrative penalties on trustees that fail to comply with the Government guidelines and to remove or suspend trustees of non-complying Ancillary Funds.

You can use the Cleardocs "Not-for-profit Pty Ltd company" to be the trustee of an Ancillary Fund, but you don't have to — it can be used for other not-for-profit purposes.

If you do want the company to be the trustee of an Ancillary Fund, then you need to choose "yes" to the following question on the Cleardocs interface: "Is this company going to be a not-for-profit company? (Including as the trustee of a Private Ancillary Fund or a Public Ancillary Fund)".

What happens to the assets of the not-for-profit Company on a winding-up?

On a winding-up of the not-for-profit proprietary limited company, any assets which are left over after the company has paid its debts must be distributed to another entity with similar objectives to the company. The assets must not be distributed to the shareholders.