Pty Ltd Company

Your Pty Ltd company must have at least one director who is an Australian resident, at least 18 years old, not insolvent, and not barred from corporate management. You also need to decide on the company’s shareholders, who can be individuals or other companies, both Australian and foreign.

See our Company Director article for detailed discussion of the roles and responsibilities of a company director.

What is a Company Secretary? 

A company secretary is a company officer whose role is to ensure the company adheres to legal and regulatory requirements.  

In larger companies, the company secretary has a significant impact on the functioning of the company’s board. The company secretary advises the board on ethical standards and corporate conduct, and provides insights into the implications of the board’s business decisions. 

Eligibility Criteria for a Company Secretary  

According to the Corporations Act 2001, all companies apart from proprietary limited (Pty Ltd) companies must appoint at least one company secretary. Below are the criteria that must be met by anyone assuming the role of a company secretary in such companies: 

• Age and Status Requirements: The individual must be a natural person who is over the age of 18. This ensures that the appointee is legally an adult and can be held accountable for their responsibilities. 

• Skills and Experience: While there are no specific educational or professional qualifications mandated by law, the person designated as company secretary should have the relevant skills, knowledge, and experience required to manage the legal and compliance aspects of the company effectively.  

• Financial Integrity: The candidate must not be an undischarged bankrupt. This requirement helps ensure that the company secretary is financially responsible and capable of managing or overseeing the financial practises of the company without any legal encumbrances. 

• Employment Status: The role of the company secretary can be filled either by an employee of the company or through a contracted service provider. This flexibility allows companies to choose an arrangement that best suits their operational structure and needs. 

Solutions for Companies Unable to Appoint a Company Secretary 

In situations where a Pty Ltd company is unable to find a suitable individual to fill the role of company secretary, there is an option to hire third party service providers. These organisations specialise in company secretarial services and employ professionals who are well versed in the legal and regulatory requirements of corporate governance in Australia. Engaging a third party service provider allows smaller companies to fulfil their legal obligations without bearing the full cost of employing a full time company secretary.  

Roles and Duties of a Company Secretary 

Governing and Monitoring Company Operations 

A company secretary plays a pivotal role in the governance and operational oversight of a company. This includes supporting the board of directors by ensuring that the company adheres to corporate laws and regulations. Part of their role involves maintaining essential corporate records and handling the administrative duties that facilitate smooth operations. 

Compliance Responsibilities 

One of the primary responsibilities of a company secretary is to ensure the company remains compliant with Australian corporate law. This entails maintaining the company’s registered office address, managing the members register, and overseeing the company’s share structure and the issuance of shares.  

They are also responsible for lodging financial reports with the Australian Securities and Investments Commission (ASIC) and reporting any significant changes to the company’s structure or management. 

Legal Obligations as a Company Officer 

In addition to their specific secretarial tasks, company secretaries are also recognised as officers of the company under Australian corporate law. This designation subjects them to many of the same legal duties as the company’s directors. These duties include: 

• Duty of Care and Diligence: They must perform their roles with a high standard of care and attention to detail to prevent negligence that could harm the company. 

• Duty to Act in Good Faith: Company secretaries must act honestly and with loyalty to the company, ensuring that their actions serve the company’s best interests and are aligned with its objectives. 

• Prohibition Against Misusing Position: They must not use their position or the information they gain from it to benefit personally or to favour others at the company’s expense. 

• Prohibition Against Misusing Information: Similarly, they must not use the knowledge acquired through their role to cause detriment to the company or for personal gain. 

These responsibilities ensure that company secretaries act as key guardians of the company’s compliance and ethical standards, contributing to its overall integrity and success. 

Administrative and Record Keeping Functions 

A company secretary ensures that all discussions and decisions made during board meetings are meticulously documented in the minutes. They are also responsible for organising meetings, ensuring they are called and conducted according to regulatory and company guidelines. 

Compliance and Monitoring 

The company secretary plays a critical role in monitoring the board’s adherence to policies and procedures. They are tasked with preparing and delivering reports to the board, maintaining the accuracy of financial reports, and ensuring that all compliance related documents and procedures are up to date and implemented correctly. 

Governance and Advisory Services 

This role includes providing the board with guidance on governance issues, assisting in the induction of new directors, and supporting the ongoing professional development of existing directors. The company secretary often advises the board on ethical standards and practises, helping to shape the corporate culture and ethical framework of the company. 

Expanded Role in Larger Organisations 

Strategic Advisory and Board Performance 

In larger companies, the company secretary’s role encompasses a broader spectrum of responsibilities, particularly in advising the board on strategic matters. This includes providing critical information for decision making, organising board performance evaluations, and playing a significant part in risk management and corporate responsibility initiatives. 

Director Support and Policy Development 

The company secretary manages the induction process for new directors, organises insurance for directors and officers, and helps formulate new policies for the board. They provide comprehensive advice on the conduct of company business and guide the board on the implications of their decisions. 

Variation by Company Size 

The scope of responsibilities for a company secretary can vary significantly based on the size and structure of the company. In larger companies with many shareholders and a complex board structure, the role is more demanding, involving a wider range of tasks and greater responsibility. Conversely, in smaller companies with fewer shareholders, the role may be less intensive, requiring less frequent engagement with complex governance issues. 

How to Appoint a Company Secretary 

In Australia, public companies are mandated to appoint at least one company secretary, and it is required that at least one of these secretaries be a resident of Australia, regularly living in the country.  

While private companies are not obligated to have a company secretary, if they choose to appoint one, the same residency requirement applies. The appointment of a company secretary is made by the company’s directors who also set the terms and conditions of the role, including salary. 

Upon appointment, the company must file a notification with the Australian Securities and Investments Commission (ASIC) within 28 days. Additionally, the appointee must provide signed consent to accept the role of company secretary. This consent must be retained by the company as part of its official records. 

You can register your Pty Ltd Company with ASIC by engaging the services of an accountant, lawyer or an registered ASIC agent. Provide details like the company name, director(s), shareholder(s), and the registered office address.

What is a Company Constitution? 

A Company Constitution is essentially a document that establishes the regulations for how a company is run, detailing the roles and relationships between the directors and shareholders. It serves as a foundational guide for managing the company’s operations and resolving any conflicts that arise.  

A constitution is necessary for companies because it provides specific guidelines on how the company should be governed. In Australia, the ASIC mandates that every company must decide whether to draft its own constitution, follow the replaceable rules set forth in the Corporations Act 2001, or use a mix of both approaches. This decision needs to be made before a company is officially registered. 

Furthermore, ASIC requires certain types of companies, specifically special purpose companies and no liability public companies, to have a constitution. This is because these kinds of companies have particular needs and responsibilities that require specific governance structures beyond what the replaceable rules provide. Therefore, having a constitution is compulsory for these companies to ensure proper regulation and management. 

What Should a Company Constitution include? 

A Company Constitution is a comprehensive document that outlines the guidelines for managing a company’s operations and structure. It should address several key areas to ensure clarity and organisation within the company: 

• Company Structure: This includes the basic setup and framework of the company. 

• Share Related Matters: Details about issuing, transferring, and classes of shares should be included, along with information about share certificates. 

• Governance and Meetings: The constitution should define how meetings are governed and organised, including voting procedures and the roles and responsibilities of the company secretary if one is appointed. 

• Directors and Management: The document must cover the appointment and removal of directors, their powers, and how they are managed. 

• Financial Aspects: Guidelines on handling dividends and other financial procedures should be specified. 

• Execution of Documents: There should be clear rules on how company documents are executed. 

• Shareholder Rights: Rights and obligations of shareholders, beyond the basics of shareholding, should be clearly laid out. 

• Amending the Constitution: The process for making amendments to the constitution itself should be defined to accommodate future changes in company operations or regulations. 

Thus, the constitution serves as a formal guide to ensure that all aspects of company governance are handled consistently and legally. 

When Should a Company Adopt a Constitution? 

A company has the flexibility to adopt a constitution at two possible stages: either before it is registered or after. 

If a company chooses to establish a constitution prior to its registration, all members are required to give their written consent to the terms outlined in the constitution. This ensures that all founding members agree on the governance and operational rules from the outset. 

On the other hand, if a company decides to adopt a constitution after it has been registered, it must secure the approval of its shareholders through a special resolution. This means that at least 75% of the shareholders who have voting rights must agree to the adoption of the constitution. This process allows for shareholder input and consensus on how the company should be governed going forward. 

If a company doesn’t adopt its own constitution, it automatically falls under the default rules outlined in the Corporations Act 2001, which are referred to as replaceable rules. These rules provide a standard structure that governs the company unless a specific constitution is put in place. 

How to Adopt a Company Constitution 

To establish a constitution when a company is being formed, every initial member must consent to it in writing. If a company wishes to introduce a constitution after it has been incorporated, it must follow a specific procedure. 

Initially, the company needs to distribute a notification regarding a special resolution and a general meeting. Publicly listed companies are required to provide at least 28 days’ notice before the meeting, while other types of companies must issue a notice at least 21 days in advance. The notice should specify the time, date, and location of the meeting, detail the primary topics of discussion, and express the intention to adopt the resolution. 

The next step involves holding a general meeting where a special resolution for adopting the constitution is presented. To pass this resolution, at least 75% of the voting members must support it. The process may also involve additional requirements laid out in the company’s original constitution concerning the passage of resolutions. 

What are the Replaceable Rules? 

Replaceable rules are a set of default provisions found in the Corporations Act that are applicable to companies. These rules can be adapted or entirely replaced by a company’s constitution, except for certain mandatory rules that must be adhered to by all companies. 

Here are the key aspects of replaceable rules: 

Applicability: They do not apply to companies with a single shareholder or director, as these entities are governed by a separate set of rules in the Corporations Act. 

Coverage: The rules includes several areas including: 

• Appointment and removal of directors. 

• Rights of shareholders to access company books. 

• Remuneration of directors. 

• Powers vested in directors. 

• Conduct of meetings for directors and members. 

• Handling of shares in events such as a shareholder’s death or bankruptcy. 

• Rights associated with shares. 

Legal Consequences: A violation of replaceable rules is not considered a violation of the Corporations Act itself. Since these rules establish contractual obligations between the company and its shareholders, any breach is treated as a breach of contract, rather than a breach of statutory duty. This distinction highlights the contractual nature of the rules within the framework of company operations and shareholder relations. 

Why Choose a Constitution Over Replaceable Rules 

Here are several compelling reasons why a constitution often proves more beneficial for aligning with specific corporate needs than the replaceable rules: 

Tailored Corporate Governance 

A company constitution offers the advantage of being a bespoke document tailored to the specific needs of a company. Unlike replaceable rules, which are general and may not cover all scenarios, a constitution can be meticulously crafted to align with the unique operational and strategic requirements of a business. This makes it simpler and more efficient for companies, particularly larger ones, to manage their governance without constantly referring back to the broader Corporations Act. 

Enhanced Control Over Leadership Dynamics 

Replaceable rules typically afford significant powers to shareholders, such as the ability to remove directors. This can introduce instability within the company’s leadership, particularly if shareholder interests are diverse or conflicting. A constitution can restrict or modify these powers, providing a more stable governance structure that supports long term strategic leadership. 

Flexibility in Financial Management 

Constitutions allow companies to issue partly paid shares and manage the demands on these shares, known as calls. This flexibility is crucial for managing cash flow and financing needs, enabling a company to effectively control when and how much shareholders are required to contribute towards their shareholdings. 

Diverse Equity Structures 

A constitution enables the creation of multiple classes of shares, each with specified rights concerning voting, dividends, and other privileges. This is particularly useful for companies seeking to attract different types of investors or to reward certain stakeholders with enhanced rights without altering the overall balance of control. 

Control Over Share Transfers 

Including pre emptive rights in a constitution allows a company to manage the issuance and transfer of shares more closely. This can be critical for maintaining continuity in ownership and control, preventing unwanted external influences, and preserving shareholder value. 

Simplicity in Modifications 

One of the most significant advantages of a company constitution is its adaptability. While replaceable rules are static and can only be amended through legislative reform, a constitution can be modified as needed. This allows companies to quickly adapt to changes in the business environment, regulatory landscape, or internal company needs. 

How to Amend a Company’s Constitution 

Amending a company constitution involves a structured process centered around passing a special resolution. Initially, a review of the current constitution is necessary to understand the specific stipulations for amendments, including identifying any clauses that cannot be altered. 

Notice of the special resolution must be provided to all relevant parties. For private companies, at least 21 days’ notice is required, while public companies must give 28 days’ notice. This notice should detail the location, date, and time of the meeting where the resolution will be discussed, along with information on the proposed changes, an agenda, and instructions for proxy voting and electronic voting. 

For the amendment to be officially adopted, the special resolution must receive approval from at least 75% of the votes cast in its favour. Following the resolution’s passage, private companies must provide an updated constitution to any member who requests it within seven days.  

After company registration, apply for an Australian Business Number (ABN) through the Australian Business Register (ABR). This unique 11 digit number identifies your company for business purposes. It’s essential for invoicing, GST credits, and tax compliance.

ASIC will automatically allocate an ACN to a newly registered company. An ABN is usually comprised of the 9 digits of the ACN plus an extra 2 digits.

For the the differences between an ABN and an ACN, see our ACN vs ABN article.

If your annual business turnover is expected to exceed $75,000, you must register for Goods and Services Tax (GST), typically 10% of goods and services provided in Australia.

Separate your personal and business finances by opening a dedicated company business bank account. This allows you to manage company finances, track expenses, and fulfill tax obligations.

• Ltd simply means ‘limited’ and signifies limited liability for shareholders or members
• These companies, including those limited by guarantee, are public companies, implying some public ownership.
• ASIC mandates that limited companies file annual accounts.
• Public companies must have at least three directors and can have numerous shareholders.
• Unlike proprietary companies, public companies may list their shares on the Australian Stock Exchange (ASX).