10 pitfalls to avoid when registering a company in Australia

Top 10 pitfalls when registering a company in Australia

Registering a company in Australia can be a complex process, and even small errors can lead to significant delays and additional costs. In this article, we will highlight the most common mistakes made during the registration process and provide practical tips on how to avoid them.

By understanding crucial aspects of the process and common pitfalls, you can ensure a smoother and more efficient registration experience.

1. Wrong spelling of company name

Incorrectly spelling your company name when registering is all too easy, but correcting the mistake can be costly. The company must prepare and lodge the required documents to change their registered company name, provided that the name is available and not otherwise taken.

2. Misunderstanding of company type - Public vs Private

Public companies sell shares of its stock to the general public on a stock exchange, while private companies are owned by a limited group of individuals, such as founders or private investors. It is important to ensure you choose the correct company type for your business needs and recognise the different obligations for each type.

For example, a public company has stricter legislative requirements, such as the need to have a company secretary, hold an annual general meeting (AGM), and have a minimum of three directors.

3. Written consents are critical

Written consents refer to legally required documents where individuals who will be directors, secretaries, or shareholders of a new company must sign, signifying their agreement to take on those roles. Written consents must be obtained from all officeholders and shareholders before the registration documents are lodged with ASIC.

4. Directors, officeholders and shareholders must be disclosed correctly

It is important to ensure that all officeholders and shareholders are disclosed when registering a company. This means that you must disclose their full legal name, including their middle name, and this information must match their passport (or equivalent identity document).

5. Director identification numbers (DINs)

Directors must obtain a Director Identification Number (DIN) before being appointed as a director. This unique identifier helps prevent fraud and improve transparency. It is important to ensure the DIN application aligns with the director’s information on the ASIC register.

6. Ensure you have local Australian resident directors

To register in Australia, public companies must have at least two directors who are Australian residents, and private companies must have at least one. If the company has a sole director, the director must reside in Australia.

7. Beneficial ownership of shares

The registration of a company must contain information about the company's shareholders and whether the shares are held beneficially or non-beneficially. To be considered beneficially held, an individual has a direct or indirect interest in a company and receives a benefit from the shares. If the shareholder is holding the shares on behalf of another person, organisation, or trust, those shares are not beneficially held.

For example, if a trustee company is a member, it means the trustee holds the shares on behalf of the beneficiaries; the trustee company itself is not the beneficial owner.

8. Company constitutions vs replaceable rules

A company constitution and replaceable rules are both documents that govern a company's internal management. A constitution is a contract between the company, its directors, and shareholders. Replaceable rules are a basic set of rules that apply to a company if it doesn't have a constitution.

It is important to understand which of these documents is required for your company and to produce them when registering your company. 'No liability' public companies and special purpose companies (e.g. superannuation trustee or not-for-profit companies) are required to have a constitution. For all other companies, you may adopt a constitution or use the replaceable rules instead.

9. Ensure an accurate business address

The company’s business address should be the primary location where it conducts its business. The address must be a physical address in Australia - the use of a PO Box is not permitted.

10. Occupier’s consent

In some cases, the most accurate business address may not be straightforward. If the company does not occupy the premises at the address of its registered office, it must obtain written consent from the occupier. ASIC may request to see a copy of the occupier’s consent, so it is important to have this prepared and on hand to produce when registering a company.

Registering a company can be a complicated process, and each step should be completed with the utmost accuracy. Our corporate secretarial experts have experience supporting many complex company registrations and ongoing ASIC obligations. If you require support in the process or have questions or queries about company registration, contact our team.

Disclaimer

This publication has been carefully prepared, but is general commentary only. This publication is not legal or financial advice and should not be relied upon as such. The information in this publication is subject to change at any time and therefore we give no assurance or warranty that the information is current when read. The publication cannot be relied upon to cover any specific situation and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances.
A.C.N. 050 110 275 Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not give any warranty as to the accuracy, reliability or completeness of information contained in this publication nor do they accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it, except in so far as any liability under statute cannot be excluded.

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