Establishing a New Business in Australia
A business enterprise in Australia may be operated by an individual, a trust, a company, a joint venture, a partnership or a branch of a foreign company. Each has different legal and taxation implications. A foreign investor may conduct business in Australia through any of these structures.
The most common choices include establishing an Australian subsidiary by registering or acquiring an Australian company or by registering as a ‘foreign company’. In both cases, registration is with the Australian Securities and Investments Commission and governed by the Corporations Act 2001.
On this page:
|Establishing a new Australian subsidiary||Acquiring an Australian Company|
|Remaining a Foreign Company||Joint Ventures|
|Registering a Foreign Company||Partnerships|
A foreign company can establish a new Australian subsidiary by registering a new Australian company or by acquiring an existing ‘shelf’ company (which is a recently registered company that has not yet traded). If registering a new company, the Corporations Act 2001 allows for the registration of four types of companies:
- a company limited by shares
- a company limited by guarantee
- a company with unlimited liability
- a no liability company (for mining purposes).
A company wishing to apply to the Australian Securities and Investments Commission for registration must:
- ensure the company’s name is available
- have a registered office in Australia
- lodge an application form.
A name would be unavailable if it is currently registered by another company or business or is unacceptable under Corporations Regulations 2001 as it contains a restricted word or expression or suggests a connection to government.
If a name is available it may be reserved for a period of two months while the company prepares the necessary registration documents.
As an Australian subsidiary of a foreign company is a separate legal entity, it must have a registered office within Australia and there are also requirements to have Australian resident directors:
- A proprietary company must have at least one director, but need not have a secretary. One director and the secretary (if any) must reside in Australia.
- A public company must have at least three directors and at least one secretary. Two of the directors and one secretary must reside in Australia.
There are no minimum capital requirements for an Australian subsidiary of a foreign company. Whether an Australian subsidiary is established by registering a new company or acquiring an existing ‘shelf’ company, it will need to:
- lodge documents with the Australian Securities and Investments Commission
- apply for an Australian Business Number
- apply for a Tax File Number
- be registered for the Goods and Services Tax.
When acquiring an Australian company, foreign investors need to know when prior approval for investment in Australia is required under the Government’s foreign investment policy and the Foreign Acquisitions and Takeovers Act.
Proposals by foreign interests to invest in Australia which require prior approval and therefore should be notified to the Australian Government include:
- Acquisitions of ‘substantial interests’ in existing Australian businesses with total assets of, or where the proposal values the business at, more than $100 million.
- For US investors, different thresholds apply. Thresholds are: $100 million for investors in prescribed sensitive sectors or by an entity controlled by the United States Government or $871 million in any other case.
- Proposals to establish any new business involving a total investment of $10 million or more.
- Proposals by US investors, except an entity controlled by the United States Government, do not require notification but remain subject to other relevant policy requirements.
- Takeovers of offshore companies whose Australian subsidiaries or gross assets are valued at more than $200 million and represent less than 50% of total assets.
- For US investors, the $871 million threshold applies, except for offshore takeovers involving prescribed sensitive sectors or an entity controlled by the US government, whereby a $200 million threshold applies.
- Direct investments by foreign governments or their agencies irrespective of size.
Under the Foreign Acquisitions and Takeovers Act, the Australian Government has the power to block proposals that are determined to be contrary to the national interest.
Foreign companies may apply for listing on the Australian Stock Exchange. To obtain and maintain a stock exchange listing, companies need to meet the prescribed requirements set out in the stock exchange listing rules, which include firm disclosure and reporting requirements. Foreign listed organisations may also qualify as a foreign exempt listing.
A foreign company conducting business in Australia, other than through an Australian subsidiary, must register with the Australian Securities and Investments Commission.
A foreign company wishing to apply for registration must:
- Ensure the company’s name is available. A name would be unavailable if it is currently registered by another company or business or is unacceptable under Corporations Regulations 2001 as it contains a restricted word or expression or suggests a connection to government.
- If a name is available it may be reserved for a period of two months while the company prepares the necessary registration documents.
- Complete and lodge the relevant application form and documents, including a certified copy of the company’s certificate of incorporation (or a document of similar effect) and constitution documentation.
- Have a registered office in Australia.
- Appoint a local agent to ensure it complies with its legislative requirements in Australia.
If the commission is satisfied with the application and supporting documentation and the statutory registration fee is paid, registration usually occurs within five business days of receipt of the application.
The commission will allocate an Australian Registered Body Number to the foreign company and issue a ‘Certificate of Registration’ evidencing its registration as a foreign company in Australia.
In terms of post-registration obligations, a registered foreign company is required to lodge its balance sheet and profit and loss and cash flow statements with the commission at least once every calendar year.
Registered foreign companies must also notify the commission of certain changes as they occur within prescribed time limits. This includes changes to the structure of the company itself, such as its name or constitution, or changes concerning its directors, local agent or office addresses.
Foreign investors may enter into joint venture agreements with Australian entities to carry out commercial activities thus avoiding the need to incorporate an Australian subsidiary or register as a foreign company. A joint venture is often used when the parties intend to simply undertake one venture rather than carry on a continuous business. Joint ventures are a popular structure for mining and manufacturing enterprises. The joint venture is governed by the terms of the joint venture agreement between the parties as well as common law (also known as case law) and contract law (exchange of promises between two or more parties).
Partnerships are a common arrangement, particularly in fields such as law and accounting. Partnerships are formally recognised legal relationships and are governed by state and territory laws consisting of mixtures of trust law (whereby property is managed by one party on behalf of another), agency law (when an agent is authorised to act on behalf of the principle) and contract law. Each partner is taxed separately on income received.
The two types of trading trusts available in Australia are discretionary trusts and unit trusts. Discretionary trusts are commonly used for family trust purposes and unit trusts, in particular public unit trusts, are designed for investment purposes. The structure of a unit trust resembles that of a company in that interest in the trust’s property is divided into units and the investors hold a number of units according to their investment. Trusts are typically governed by common law and contract law as well as industry-specific laws.
Content current at 16 December 2010.