Incorporation under the Corporations Act 2001

An organisation wishing to operate for profit or conduct its activities anywhere in Australia can incorporate as an Australian company under the Corporations Act 2001.

Organisations can incorporate as either a public or private company. Private companies (proprietary companies) cannot have more than 50 members and are not able to attract investment from the general public. Public companies can raise capital by offering shares to the public and there is no restriction on the number of members (shareholders). For these reasons, public companies are subject to more stringent disclosure and reporting requirements under the Corporations Act 2001 than proprietary companies.

There are four types of companies:

  • Public no liability company. No liability companies can only be used for mining purposes.
     
  • Unlimited company with share capital. Unlimited companies with share capital can be public or proprietary. This type of company is often used for pooled investments because it is easier for members to withdraw their investment capital from this type of structure. The disadvantage is members are personally liable for the debts of the company.
     
  • Company limited by shares. A company limited by shares can be public or proprietary and is often used for business purposes. Members' personal liability is limited to any unpaid subscription price for their own shares in the company.
     
  • Public company limited by guarantee. A company limited by guarantee must be a public company and is therefore subject to the more stringent disclosure and reporting requirements for public companies under the Corporations Act 2001. Companies limited by guarantee cannot issue shares. This is an advantage for not-for-profit organisations with a fluctuating membership as members do not have to buy shares in the company.

    Like a company limited by shares, this company structure limits liability of members. Instead of being limited to the amount payable for shares issued, liability is limited to the amount agreed to in a guarantee (e.g. the membership fee). However, members only need to contribute the guaranteed amount if the company is wound up. The company must include 'Limited' or 'Ltd' at the end of its name. This requirement may be waived for a not-for-profit organisation.

    Another requirement is that, as a public company, a company limited by guarantee must open its registered office for at least three hours each business day. If this requirement causes difficulty, arrangements could be made with a professional business (e.g. an accounting or law firm) to use their office as the company's registered office.

In general, companies have greater scope than incorporated associations in the activities that they can undertake.

The main issues with becoming a company are that companies are more highly regulated than other entities, and incorporation can also be expensive (at least $1000) and involve higher ongoing costs.