Australian Corporate Law 100 FQAs

Quick Answer: In short: The most common is the Pty Ltd (proprietary limited company), followed by public companies. Small businesses may operate as sole traders or partnerships, but strictly speaking those are not companies.

Under the Corporations Act 2001 (Cth), a “company” is a separate legal entity registered with ASIC. The two most common forms are the proprietary limited company (Pty Ltd) and the public company. Pty Ltd is the standard form for small and mid-sized businesses, capped at 50 non-employee shareholders and prohibited from raising funds from the public. Public companies are used by listed entities and those preparing to list, with no shareholder cap and the ability to issue securities to the public. Other forms include companies limited by guarantee (commonly used by not-for-profits) and no-liability companies (mining sector). Sole traders and partnerships are operating structures rather than companies in the strict sense.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 9, 112, 113

Quick Answer: In short: The standard private company used by SMEs — up to 50 non-employee shareholders, no public fundraising, and limited liability for shareholders.

“Pty Ltd” combines “proprietary” (private) and “limited” (limited liability). “Private” means the company cannot raise funds from the public and is capped at 50 non-employee shareholders. “Limited liability” means shareholders’ losses are confined to their share capital, save where they have given personal guarantees or breached statutory duties. Over 95% of registered Australian companies are Pty Ltds, owing to their lower set-up costs, lighter compliance burden, and access to small-company tax rates.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 9, 113, 516

Quick Answer: In short: A company that may raise funds from the public, with no shareholder cap and stringent disclosure obligations — typically a listed entity.

A public company has no shareholder cap and may issue shares to the public, attracting significantly heavier regulation: annual audit, mandatory AGM, a minimum of 3 directors (at least 2 ordinarily resident in Australia), and full financial reporting. If listed on ASX, the ASX Listing Rules apply on top of the Corporations Act. Most start-ups do not begin life as public companies; they typically convert when preparing for IPO or undertaking a public offer.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 9, 201A, 250N

Quick Answer: In short: A sole trader is the business — income flows to the individual’s tax return and the individual bears all liabilities personally. A company is a separate legal entity that ring-fences business risk from personal assets.

A sole trader has no separate legal personality — the trader and the business are one and the same in law. The advantages are simplicity (only an ABN is needed) and minimal administration. The downside is unlimited liability: business debts can reach personal assets, including the home. Once a Pty Ltd is incorporated, the company is a separate legal person that contracts, owes debts, and sues or is sued in its own name; the shareholder bears only limited liability. The trade-off is heavier compliance: ASIC annual reviews, separate tax returns, and possibly audit. A Pty Ltd is generally preferred where turnover is meaningful, employees are engaged, or the business carries elevated risk.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 124 (separate legal personality); Income Tax Assessment Act 1997

Quick Answer: In short: A partnership is two or more persons carrying on business together, with joint and several unlimited liability. A company is a separate legal person, with shareholder liability limited to share capital.

Partnerships are governed by State Partnership Acts, typically with 2 to 20 partners sharing profits and risks. A partnership is not a separate legal entity; partners bear joint and several liability for partnership debts — a creditor may pursue any one partner for the full amount. This contrasts sharply with a Pty Ltd. Law and accounting firms historically used partnerships, but most have shifted to incorporated legal practice / Pty Ltd structures, with limited partnerships available in some circumstances. Australia does not commonly use the LLP form found in the US or UK, so use of that term in an Australian context can be misleading. For ordinary commercial businesses, a Pty Ltd is generally preferred.

Legal Reference: Statute: Partnership Act (each State); Corporations Act 2001 (Cth) s 115

Quick Answer: In short: Choose a name, settle directors and shareholders, confirm the registered office, decide between Replaceable Rules or a bespoke constitution, and lodge online with ASIC.

In practice: (1) check name availability on ASIC Connect; (2) appoint at least one director ordinarily resident in Australia, identify shareholders, and confirm a registered office (a physical Australian address — PO Boxes are not permitted); (3) select governance rules — either rely on the statutory Replaceable Rules or adopt a bespoke constitution; (4) lodge Form 201 via ASIC and pay the prescribed fee (use the current ASIC fee, currently around A$611 — fees adjust annually). The ACN typically issues the same day. Most clients engage an accountant or registered ASIC agent to handle the lodgement.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 117, 118

Quick Answer: In short: An ACN is the 9-digit company number issued by ASIC to every Pty Ltd. An ABN is the 11-digit business number issued by the ATO, used for invoicing and GST.

The two are routinely confused. The ACN (Australian Company Number) is a 9-digit identifier issued by ASIC at the moment of incorporation — the company’s legal “ID”. The ABN (Australian Business Number) is an 11-digit identifier issued by the ATO, required by anyone wishing to issue tax invoices or register for GST. A Pty Ltd’s ABN is typically the 9-digit ACN with a 2-digit prefix. Sole traders have no ACN but may apply for an ABN. Businesses with annual turnover above A$75,000 must register for GST.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 118; A New Tax System (Australian Business Number) Act 1999

Quick Answer: In short: Yes — a Pty Ltd may have one director and one shareholder, and the same person may fill both roles.

Australian law expressly permits single-member companies: a Pty Ltd needs only one director and one shareholder, and the two may be the same person. This is highly convenient at start-up — one person can incorporate a limited liability company that ring-fences personal assets from business risk. A sole director company should still document key decisions through written resolutions or minutes; the absence of a board does not justify the absence of a paper trail. Public companies require at least three directors.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 114, 201A

Quick Answer: In short: Yes — a Pty Ltd is capped at 50 non-employee shareholders. Above that, conversion to a public company is required.

The Corporations Act caps Pty Ltd membership at 50 non-employee shareholders — the defining feature of the “proprietary” form. As a company issues shares to outside investors, or rolls out an employee share scheme that pushes membership beyond the threshold, conversion to public company status must be considered. Once the cap is exceeded, ASIC may require conversion, and continuing breach attracts penalties.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 113

Quick Answer: In short: Form 201, consents from each director / company secretary / member, occupier’s consent for the registered office, and a constitution (unless relying on Replaceable Rules).

The standard pack includes: (1) Form 201 (application for registration); (2) consents to act from each director and company secretary; (3) applications for shares / consent to be a member from each shareholder; (4) occupier’s written consent to use the registered office (where the company does not occupy the address itself); and (5) a constitution, if not relying on the Replaceable Rules. These documents need not all be lodged with ASIC, but must be retained in the company’s records and be available for inspection.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 117, 120

Quick Answer: In short: A physical Australian address (no PO Boxes); occupier’s written consent if the company does not occupy the premises. Public company registered offices must also be open to the public during prescribed hours.

The registered office is the official address at which ASIC and others serve documents on the company. Core requirements: (1) located in Australia; (2) a physical address — PO Boxes are not permitted; (3) where the company does not occupy the premises, the occupier’s written consent must be obtained. Public companies must also keep the registered office open to the public during prescribed hours (s 145); proprietary companies generally need not be open to the public, but the address must be capable of receiving service. The registered office need not be a place of business — many founders use their accountant’s, lawyer’s, or company secretarial provider’s address, with consent.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 100, 142, 143, 145

Quick Answer: In short: A Pty Ltd must have at least 1 director; a public company at least 3. At least 1 (Pty Ltd) or 2 (public) must be ordinarily resident in Australia.

A Pty Ltd needs a minimum of one director, who must be ordinarily resident in Australia — foreign-only boards are not permitted. Public companies require at least three directors, of whom at least two must be ordinarily resident. “Ordinarily resident” is a question of fact rather than nationality — it turns on actual residence in Australia. Foreign investors incorporating a Pty Ltd typically need to find an Australian-resident nominee director, but this requires care: a nominee director assumes the full statutory duties of a director.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 201A, 201B

Quick Answer: In short: A Pty Ltd needs at least 1 director ordinarily resident in Australia, and a public company at least 2. Other directors may be of any nationality.

“Ordinarily resident” is a factual test — principal residence, where family lives, banking, visa status, and the like. Temporary visa holders may serve as directors in principle, provided they actually live in Australia; holding PR while residing overseas is insufficient. Foreign investors commonly engage Australian lawyers or accountants as nominee directors, although ASIC has become increasingly attentive to such arrangements, since a nominee director bears the same statutory duties as any other director. In addition, Australia now operates a Director ID regime (administered by the Australian Business Registry Services, not ASIC): a person proposing to act as director must generally apply for a Director ID before appointment; existing directors who have not yet applied should do so without delay. Director ID applications must be made by the individual in person — agents cannot apply on the director’s behalf.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 201A; Corporations Act 2001 (Cth) Part 9.1A (Director ID); Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020

Quick Answer: In short: A Pty Ltd is not required to have a company secretary, but it is good practice. A public company must, with at least 1 ordinarily resident in Australia.

The company secretary handles legal compliance, ASIC lodgements, and the procedural conduct of board and member meetings. Following the 2003 reforms, a Pty Ltd is no longer required to appoint a secretary, and many small companies have a director double up. Public companies must appoint at least one secretary ordinarily resident in Australia. Company secretaries owe statutory duties similar to those of directors — they must maintain corporate records and lodge with ASIC, with personal liability for breach. Even where not required, having a dedicated compliance contact remains good practice.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 188, 204A

Quick Answer: In short: A set of default governance rules in the Corporations Act — if you do not adopt a constitution, these apply automatically. Best suited to simple small companies.

The Replaceable Rules are 39 default governance provisions set out in s 141 of the Corporations Act, covering the appointment and removal of directors, board procedure, members’ meetings, share transfers, and dividends. If a company does not adopt a constitution at registration, the Replaceable Rules apply by default; a constitution may displace any of them. The advantage is simplicity, low cost, and statutory backing. The disadvantage is that the rules are generic — they do not deal with employee share schemes, preference shares, tag-along/drag-along rights, or other bespoke arrangements. They are usually adequate for an uncomplicated start-up.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 134, 135, 141

Quick Answer: In short: The company’s bespoke internal “constitution”, which displaces the Replaceable Rules and governs share rights, the board, and decision-making.

A constitution is a statutory contract between the company, its members, and its directors. A typical constitution covers: classes of shares (ordinary, preference); issue of new shares; restrictions on transfer; appointment and removal of directors; board procedure; members’ meetings; dividend policy; and winding up. As soon as a company contemplates non-standard share structures — ESOP, A/B classes, liquidation preferences — a constitution becomes necessary. Adoption requires a special resolution (75%), and so does any amendment.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 136, 140

Quick Answer: In short: Cannot duplicate an existing company name, cannot mislead, cannot include restricted words such as “Bank” or “University” without authorisation, and a Pty Ltd’s name must end in “Pty Ltd” or its equivalent.

ASIC’s hard rules on naming: (1) the name must not be identical or substantially similar to an existing company name; (2) it must not be offensive or misleading; (3) it must not include restricted words (such as “Bank”, “Insurance”, “University”, “Royal”, “Trust”) absent regulator approval; (4) a Pty Ltd’s name must end in “Pty Ltd”, “Pty Limited”, or “Proprietary Limited”. A company may also be registered under its ACN with no name (with the ACN serving as the name), and renamed later. Always check ASIC Connect and IP Australia trade mark records before adopting a name.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 147, 148

Quick Answer: In short: A Pty Ltd that meets at least 2 of 3 thresholds in a financial year: revenue under A$50m, gross assets under A$25m, fewer than 100 employees.

The Corporations Act divides Pty Ltds into “small” and “large”. Following the 2019 thresholds, a Pty Ltd is “small” if it meets at least 2 of: (1) consolidated revenue for the year under A$50m; (2) consolidated gross assets at year end under A$25m; (3) consolidated employee headcount under 100. Small Pty Ltds generally need not lodge financial reports with ASIC and need not be audited. Large Pty Ltds must lodge audited financial reports, with materially higher compliance cost.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 45A, 292, 293

Quick Answer: In short: A large Pty Ltd must prepare and lodge audited financial reports with ASIC each year; a small Pty Ltd generally need not.

A large Pty Ltd carries a materially heavier compliance burden: each year it must prepare a Financial Report and Directors’ Report under the AASB standards, have them audited, and lodge them with ASIC within 4 months of year-end — all publicly accessible. A small Pty Ltd is generally exempt (unless ASIC directs otherwise, or members holding 5% or more direct preparation): only the ASIC annual review fee and the keeping of books are required. This is why many businesses approaching the “large” threshold consider compliance restructuring or splits.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 292, 294, 319

Quick Answer: In short: Pass a special resolution (75%) of members, lodge Form 205 with ASIC, pay the fee, and the new name takes effect.

The change-of-name process is straightforward: (1) hold a members’ meeting and pass a special resolution (75%), or use a written resolution signed by all members; (2) lodge Form 205 via ASIC Connect, attach the resolution, and pay the prescribed fee (current ASIC fee applies); (3) ASIC typically issues a new Certificate of Registration on Change of Name within 1–3 business days; (4) update all contracts, banking, websites, and letterheads from the effective date. The ACN does not change — that number stays with the company for life.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 157, 158

Quick Answer: In short: Register with ASIC as a foreign company, obtain an ARBN, appoint an Australian-resident agent, and only then commence business in Australia.

A foreign company has three options for an Australian presence: (1) register as a Registered Foreign Company with ASIC and obtain an ARBN (Australian Registered Body Number); (2) incorporate an Australian wholly-owned subsidiary (typically a Pty Ltd); (3) operate through a representative office via an Australian agent. Option (1) requires a local agent (resident in Australia, accepting service of process), a registered office, and a translated constitution; consolidated financial reports must also be lodged annually with ASIC. Most foreign businesses (including from China, Europe, and North America) elect option (2) — a clean Pty Ltd subsidiary.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 601CD, 601CE, 601CF

Quick Answer: In short: A trust is not a company — it is a legal arrangement for holding assets. But trusts commonly use a Pty Ltd as corporate trustee.

Many Australian family businesses use a “Pty Ltd as trustee for X Family Trust” structure: the Pty Ltd is the legal person that contracts, holds assets, and sues or is sued, while economic benefit flows to the trust beneficiaries. The structure combines the tax flexibility of a trust (income streaming to beneficiaries) with the limited liability of a Pty Ltd. A corporate trustee Pty Ltd has the same compliance obligations as any other Pty Ltd, but its assets must be marked “ATF [trust name]”. Common trust types include the discretionary (family) trust, unit trust, and self-managed superannuation fund (SMSF).

Legal Reference: Statute: Corporations Act 2001 (Cth) s 124; Trustee Act (each State); the relevant trust deed. Note: s 601FB applies only to the responsible entity of a registered managed investment scheme — not ordinary family or unit trusts.

Quick Answer: In short: Commonly as holding entities, cross-border investment vehicles, or IP holders — but ATO anti-avoidance rules are stringent and FIRB watches closely.

Holding an Australian Pty Ltd through an offshore parent is lawful and common — favoured jurisdictions include Singapore, Hong Kong, BVI, and the UK. Key considerations: (1) tax residency — if central management and control is in Australia, the ATO may treat the foreign company as an Australian tax resident; (2) transfer pricing rules apply rigorously to related-party dealings; (3) Controlled Foreign Company (CFC) rules attribute foreign profits back to Australian parents; (4) Diverted Profits Tax (DPT) targets profit-shifting by multinationals; (5) FIRB reviews significant inbound investments. Cross-border structuring requires combined input from Australian and offshore tax counsel.

Legal Reference: Statute: Income Tax Assessment Act 1936 (Cth) Part X (CFC); Foreign Acquisitions and Takeovers Act 1975 (Cth)

Quick Answer: In short: No — following the 2003 reforms, common seals are optional. Companies may use one or not, depending on the constitution.

Historically, the common seal was the formal device by which a company executed deeds and contracts. Following the 2003 reforms, the Corporations Act no longer requires a company to have a seal. Companies may now execute documents in either of two ways: (1) without a seal — signed by 2 directors, by 1 director plus a company secretary, or by the sole director (s 127(1)); (2) with a seal — affixed in the presence of the same persons (s 127(2)). Most small Pty Ltds dispense with the seal. If a counterparty insists on a seal, a polite explanation that Australian law accepts signatures suffices. Following the Corporations Amendment (Meetings and Documents) Act 2022 reforms, sole director companies may also execute documents under s 127 by single signature alone — no need to find a company secretary.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 127

Quick Answer: In short: ASIC fee per current rates (currently around A$611). Online registration generally yields the ACN the same day. Total cost with agent fees is typically A$800–1,500.

Indicative cost breakdown: (1) ASIC registration fee (per current rates, currently around A$611); (2) registered agent / accountant service fee, A$200–1,000 (often bundled with ABN, GST, PAYG registration, and a constitution template); (3) annual ASIC review fee thereafter (currently around A$329 for a Pty Ltd). On timing: an online lodgement typically returns the ACN and certificate the same day — an agent with a complete pack and a compliant registered office can complete the whole process in a few hours. ASIC fees adjust each 1 July, so check the current rate at the time of registration.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 117; Corporations (Fees) Regulations 2001

Quick Answer: In short: Four core duties: act in good faith, exercise care and diligence, avoid improper use of position, and avoid conflicts of interest. Breach attracts personal liability, civil penalties, and disqualification — sometimes criminal sanction.

The Corporations Act sets out four core directors’ duties: (1) duty to act in good faith and for a proper purpose (s 181); (2) duty of care and diligence (s 180); (3) duty to avoid improper use of position or information (ss 182, 183); (4) duty to avoid conflicts of interest. There is also the prohibition on insolvent trading (s 588G). These duties apply equally to executive, non-executive, and independent directors.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 180, 181, 182, 183

Quick Answer: In short: Directors must genuinely act in the best interests of the company — not for themselves, not for particular shareholders, and not for related parties.

Section 181 requires directors to act in good faith in the best interests of the corporation and for a proper purpose. The test is both subjective (motive) and objective (whether the decision was reasonably defensible). A director cannot, for example, oppose a merger to preserve their own seat, or accept a low-ball offer to favour a related entity. Breach attracts civil penalties (financial), compensation orders, and — if dishonest — criminal liability under s 184.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 181, 184; ASIC v Adler [2002] NSWSC 171

Quick Answer: In short: Directors must act with the care and diligence of a reasonable person in their position — read the financials, attend meetings, ask questions, and challenge management when needed.

Section 180(1) requires directors to exercise the care and diligence that a reasonable person in the same position and circumstances would. Common breaches: signing accounts without reading them, persistent absence from board meetings, failing to query the CFO when red flags appear, and not reviewing ASX disclosures. The Centro, James Hardie, and Cassimatis decisions are leading authorities — the courts have made clear that even non-executive directors must read core documents themselves and cannot wholly delegate to management. This is the most frequently litigated provision in listed-company governance disputes.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 180; ASIC v Healey (Centro) [2011] FCA 717

Quick Answer: In short: A director with a material personal interest must disclose it and generally abstain from voting. In a Pty Ltd, the other directors may consent to the director acting.

Section 191 requires a director with a material personal interest in a matter being considered by the board to disclose it promptly, and (in public companies) to abstain from voting under s 195. For example, a director who proposes selling services to the company through their own business has a conflict, must disclose, and must not vote. Pty Ltds have more flexibility, with prior approval available from other directors or members. Failure to disclose may render the contract voidable, with the director liable to disgorge any benefit to the company.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 191, 195

Quick Answer: In short: A director who acts in good faith, on an informed basis, and free of material conflict is taken to have met the duty of care — even if the decision turns out badly.

Section 180(2) provides a safe harbour: a director is taken to satisfy the duty of care where four conditions are met — (1) the decision is made in good faith for a proper purpose; (2) the director has no material personal interest in the subject matter; (3) the director has informed themselves about the subject matter to the extent they reasonably believe appropriate; and (4) the director rationally believes the decision is in the best interests of the corporation. The rule, drawn from US Delaware experience, encourages decisive action without fear of hindsight. In practice, the courts apply it strictly — in Cassimatis the court declined to extend the safe harbour because the directors had not properly informed themselves.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 180(2); ASIC v Cassimatis [No 8] [2016] FCA 1023

Quick Answer: In short: Breach of ss 182–183 — possible disgorgement, civil penalty, and (if dishonest) criminal liability.

Section 182 prohibits a director, officer, or employee from improperly using their position to gain an advantage for themselves or another, or to cause detriment to the company; s 183 imposes the same prohibition on improper use of information. Common breaches: using company funds for personal purchases, trading on undisclosed M&A information, taking client lists to a competing business. Three layers of consequence: civil compensation (disgorgement and damages), ASIC civil penalty (currently the higher of 5,000 penalty units, three times the benefit obtained, or 10% of annual turnover for corporations — consult current penalty unit rates), and where dishonest, criminal sanction (up to 15 years’ imprisonment).

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 182, 183, 184

Quick Answer: In short: The company is a separate legal person, and directors are not generally liable for its debts. But veil-piercing, insolvent trading, and ATO recovery are notable exceptions where directors pay personally.

Section 124 confirms separate legal personality (the classic Salomon principle). Several situations, however, expose directors personally: (1) the insolvent trading prohibition (s 588G) where the company incurs debts while insolvent; (2) personal guarantees executed by the director; (3) veil-piercing where the company is used to perpetrate fraud or tax evasion; (4) ATO Director Penalty Notices for unpaid PAYG, GST, and superannuation guarantee. “Limited liability through a company” is therefore not an absolute shield.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 124, 588G; Salomon v A Salomon & Co Ltd [1897] AC 22

Quick Answer: In short: A person who, although not formally appointed, is one in accordance with whose instructions or wishes the actual directors are accustomed to act — subject to the full statutory duties of a director.

The s 9 definition of “director” extends to: (a) persons formally appointed; (b) persons who, although not formally appointed, in fact act as directors (de facto directors); and (c) persons in accordance with whose instructions or wishes the directors are accustomed to act — the shadow director. Common scenarios: a major shareholder or founder who declines a board seat but directs the formal directors; a foreign parent’s executives who give instructions to a local subsidiary’s board. Once classified as a shadow director, all governance duties, insolvency liabilities, and criminal exposure follow. Family controllers, married couples in business, and foreign parent executives must take particular care.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 9AC (meaning of director), 9AD (meaning of officer)

Quick Answer: In short: Civil compensation at minimum; civil penalties (substantial), disqualification, and criminal sanction in serious cases.

Breach can attract three tiers of consequence: (1) civil compensation — restitution to the company and disgorgement of benefits; (2) civil penalty — ASIC prosecution, with court-ordered pecuniary penalties currently up to the higher of 5,000 penalty units or three times the benefit obtained for individuals (per current penalty unit rates), and the higher of 50,000 penalty units, three times the benefit obtained, or 10% of annual turnover (capped at 2.5 million penalty units) for corporations; (3) disqualification — from 5 years up to life; (4) criminal liability — up to 15 years’ imprisonment for dishonest breaches. Centro, Storm Financial, and ASIC v Adler are leading authorities.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 1317E, 1317G, 184, 206C

Quick Answer: In short: Civil penalties are pursued by ASIC in civil proceedings on the balance of probabilities — pecuniary only, no imprisonment. Criminal proceedings are brought by the CDPP on the criminal standard, with imprisonment available.

Two parallel regimes operate. Civil penalty provisions are pursued by ASIC in the Federal Court on the civil standard (“more likely than not”), yielding pecuniary penalties without imprisonment — but the amounts are very large. Criminal provisions are prosecuted by the Commonwealth Director of Public Prosecutions (CDPP) on the criminal standard (beyond reasonable doubt), with imprisonment available. The same conduct may sometimes attract parallel civil and criminal proceedings. Because the civil standard is lower, ASIC’s success rate is high — civil penalty proceedings have become the regulator’s principal enforcement tool. Courts will, however, apply the Briginshaw v Briginshaw (1938) 60 CLR 336 principle in serious civil cases (such as allegations of dishonesty or fraud), requiring evidence commensurate with the gravity of the allegation rather than mechanically applying the lowest standard.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 1317E, 1317F

Quick Answer: In short: Bankruptcy, criminal conviction, and breach of duties may all attract disqualification — from 5 years up to life. The director may not act as a director of any company during the period.

Disqualification arises through three pathways: (1) automatic — on bankruptcy, or for 5 years following conviction (whether by fine or imprisonment) for prescribed offences; (2) ASIC direction — where the person has been a director of two or more failed companies (s 206F); (3) court order — for breach of directors’ duties (ss 206C/D/E). During disqualification, the person cannot hold any directorship; breach is a criminal offence. Leave may be sought from ASIC or the court. ASIC’s Banned and Disqualified Register is publicly searchable.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 206A–206H

Quick Answer: In short: Per the constitution or Replaceable Rules — reasonable notice plus a quorum is enough. Telephone or video attendance is permitted; a sole director should still record decisions in writing.

Practical points: (1) notice — “reasonable” if the constitution is silent; in practice typically 48–72 hours; (2) quorum — the Replaceable Rules default to 2; the constitution may specify otherwise; (3) decision — majority vote, with a casting vote often given to the chair; (4) form — meetings may be conducted by phone or video conference (electronic meetings, electronic execution, and hybrid meetings have been made permanent by the Corporations Amendment (Meetings and Documents) Act 2022 and related reforms); (5) a sole director should still document material decisions through written records or minutes — the lack of a board does not justify the absence of a paper trail. All board minutes must be signed by the chair and retained for at least 7 years — they are critical evidence in any subsequent dispute.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 248A–248G, 251A

Quick Answer: In short: A Pty Ltd is not required to hold an AGM. A public company must hold one each year, within 5 months of year-end.

The AGM is a statutory fixture for public companies: (1) once a year; (2) within 5 months of year-end; (3) members may attend in person or by proxy; (4) financial reports, audit report, directors’ report, and remuneration report are tabled for member consideration; (5) directors are elected and re-elected; (6) the auditor is appointed. Pty Ltds are not required to hold AGMs, although the constitution may require one. Members holding 5% or more of voting shares may requisition an extraordinary general meeting (EGM) under s 249D.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 250N (public company AGM); s 249D (member-requisitioned meetings)

Quick Answer: In short: Either by resolution at a properly convened meeting, or by all directors signing a written resolution (a “circulating resolution”).

Two forms are recognised: (1) at meeting — quorum present, after discussion, by majority vote, recorded in minutes; (2) circulating (written) resolution — all directors sign the same document, no meeting required (Replaceable Rule s 248A). Circulating resolutions are common, especially in small companies. The signed document must be retained in the minute book. Material decisions (significant contracts, executive appointments, annual financials) are best made at meetings, with proper minutes. Where the constitution requires a unanimous resolution, all directors must sign.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 248A, 251A

Quick Answer: In short: Maintains the statutory registers, lodges with ASIC, organises board and member meetings, and keeps the minute books.

The company secretary is the compliance hub: (1) maintains the registers of members and officers, and the minute books; (2) lodges ASIC notifications (appointments, address changes, annual reviews); (3) organises board and member meetings (notices, proxy forms, minutes); (4) typically holds the common seal where one is used; (5) bears personal statutory liability in public companies for various lodgement and procedural defaults. In a Pty Ltd, the secretary’s role is often filled by a director or outsourced to a registered ASIC agent or law firm.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 188, 204A

Quick Answer: In short: Public companies, large Pty Ltds, and registered foreign companies must lodge with ASIC annually. Small Pty Ltds are generally exempt, but must still keep books for 7 years.

By category: (1) public companies, large Pty Ltds, registered foreign companies, and disclosing entities must prepare an annual financial report, directors’ report, and auditor’s report, and lodge with ASIC within 4 months of year-end — publicly accessible; (2) small Pty Ltds are generally exempt, although they must keep books and produce financial statements on request from members or ASIC; (3) special cases (foreign-controlled small Pty Ltds, member requisition above 5%) bring small Pty Ltds within the lodging obligation; (4) all companies must keep financial records for at least 7 years.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 286, 292, 319

Quick Answer: In short: Mandatory for public companies and large Pty Ltds. Small Pty Ltds are generally exempt unless members holding 5% or more requisition an audit.

Audit is mandatory for: (1) all public companies; (2) large Pty Ltds; (3) disclosing entities (entities that have made fundraising disclosures); (4) foreign-controlled small Pty Ltds, unless an exemption applies. Small Pty Ltds are generally exempt. The auditor must be independent (no relevant relationship with the company), is appointed by AGM, and serves until the next AGM. Auditors owe duties to ASIC and to members; significant breaches of law or fraud must be reported to ASIC under s 311.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 301, 307, 311, 327A

Quick Answer: In short: On the company’s anniversary each year, ASIC issues an annual statement for the company to confirm details and pay the annual fee (per current ASIC rates, currently around A$329 for a Pty Ltd). Failure to pay can lead to deregistration.

The annual review is the company’s yearly “statement of position” with ASIC, listing company name, registered office, directors, members, and ACN. Within 2 months of the review date, directors must: (1) confirm the details, lodging Form 484 to update any changes via ASIC Connect; (2) pay the annual fee (per current ASIC rates — currently around A$329 for a Pty Ltd and around A$1,612 for a public company); (3) within 2 months, pass a positive solvency resolution (declaring the company will be able to pay its debts as they fall due over the next 12 months). If directors are unable to pass a positive solvency resolution, ASIC must be notified per ss 347A–347C with a negative solvency resolution. Continued non-payment leads ASIC to issue a notice and may ultimately result in deregistration.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 345A, 347A, 347B

Quick Answer: In short: A listed company must table a remuneration report at each AGM. Members vote on it on a non-binding basis, but two consecutive 25% “no” votes trigger a board spill.

Listed company executive and director remuneration must be transparently disclosed each year: (1) the remuneration report forms part of the directors’ report and details the pay, bonuses, and equity of each KMP (key management personnel); (2) members vote on the report at the AGM (advisory only, non-binding), but the “two strikes” rule has real bite — two consecutive 25%+ “no” votes trigger a spill resolution at which all directors stand for re-election (ss 250U–250V); (3) Pty Ltds have no equivalent disclosure, with executive pay treated as private.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 300A, 250R, 250U–V

Quick Answer: In short: Public companies giving a financial benefit to a related party generally need member approval, unless an exception applies (such as arm’s-length terms or reasonable remuneration).

Chapter 2E principally applies to public companies, entities controlled by public companies, and registered managed investment schemes. Any financial benefit to a related party (directors, controlling members and their spouses, children, controlled entities, trusts) requires member approval, unless one of the Chapter 2E exceptions applies: (1) arm’s-length terms; (2) reasonable remuneration; (3) small amount (≤ A$5,000); (4) indemnities and D&O insurance, etc. Ordinary Pty Ltds are not directly subject to Chapter 2E, but directors remain bound by their statutory duties, conflict-of-interest disclosure, common law fiduciary duties, the oppression remedy in s 232, and the tax law. Even in a Pty Ltd, conferring a benefit on a director, controlling shareholder, or related party should be properly approved and documented in writing. Breach of Chapter 2E attracts civil penalties and contractual consequences.

Legal Reference: Statute: Corporations Act 2001 (Cth) Chapter 2E (ss 207–230)

Quick Answer: In short: Information that a reasonable person would expect to have a material effect on price must be disclosed to ASX immediately — meaning, in practice, “right now”.

ASX Listing Rule 3.1 requires that, once an entity becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities, the entity must immediately disclose that information to ASX. Sections 674 / 674A of the Corporations Act (for listed disclosing entities) and ss 675 / 675A (for unlisted disclosing entities) translate the listing rule into a statutory obligation. Following the 2021 reforms, civil penalty proceedings generally require proof of knowledge, recklessness, or negligence. Common disclosure events include M&A activity, material contracts, profit warnings, litigation, and director changes. Late or selective disclosure (only briefing institutional investors, not the market) is a serious breach in Australia, with both ASIC civil penalties and shareholder class actions in play.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 674, 674A, 675, 675A; ASX Listing Rule 3.1

Quick Answer: In short: A person holding undisclosed material information cannot trade in the relevant securities, procure another to trade, or pass the information on. Both civil and criminal exposure are substantial.

Section 1043A prohibits a person who holds inside information (information not generally available, that a reasonable person would expect to have a material effect on price) from: (a) trading in the relevant securities; (b) procuring another to trade; or (c) communicating the information to another (tipping). Penalties are severe: civil penalties, disgorgement, and class action exposure; criminal sanction up to 15 years’ imprisonment, with individual fines per current penalty unit rates and additionally up to three times the benefit obtained. ASIC’s Markets Surveillance team monitors trading patterns; investment bankers, brokers, and listed company executives are particularly exposed.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 1043A, 1311

Quick Answer: In short: Distorting price through false trades, misleading information, or artificial demand is unlawful. Maximum sentence: 15 years.

The Corporations Act addresses market manipulation in several provisions: (1) s 1041A — conduct creating an artificial price or appearance of active trading; (2) s 1041B — false trades (wash trades, matched orders); (3) s 1041C — price manipulation; (4) s 1041E — dissemination of false or misleading information. Common breaches include “pump and dump” schemes, wash trading to inflate volume, and false M&A rumours on social media. Penalties: criminal — up to 15 years’ imprisonment plus fines; civil — pecuniary penalty for individuals up to the higher of 5,000 penalty units or three times the benefit obtained (per current penalty unit rates), with corporations subject to higher equivalents. ASIC’s Markets Surveillance team uses big data and AI to detect anomalies.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 1041A–1041E

Quick Answer: In short: No — but listed companies must explain in their annual reports any departures from the recommendations on an “if not, why not” basis.

The ASX Corporate Governance Principles and Recommendations (currently the 4th edition) covers 8 principles and 35 recommendations on board composition, independent directors, risk management, remuneration committees, diversity, and the like. They are not mandatory; a company may depart from any recommendation, provided the departure is identified and explained in the annual report or Corporate Governance Statement (the “comply or explain” model). In practice most ASX 200 companies adhere comprehensively, since departures attract poor scoring from proxy advisers and governance advisers (ISS, Glass Lewis, Ownership Matters, CGI Glass Lewis), influencing institutional investor voting.

Legal Reference: Statute: ASX Listing Rule 4.10.3; ASX Corporate Governance Council Principles, 4th ed

Quick Answer: In short: Where a company fails to remit PAYG withholding, GST, or Superannuation Guarantee Charge, the ATO may issue a DPN exposing the director to personal liability. The ATO can recover from the director personally 21 days after the DPN issues; the “30 days” is not a simple “resign and you’re safe” rule.

A Director Penalty Notice is the ATO’s mechanism for recovering the company’s unpaid PAYG withholding, GST, and Superannuation Guarantee Charge from directors personally. After 21 days from the date of the DPN, the ATO may recover the amount from the director personally. There are two types: (1) non-lockdown DPN — where the company has lodged its BAS / IAS / SGC statement within 3 months of the due date but not paid, the director typically has 21 days to cause the company to pay, enter voluntary administration, enter liquidation, or be appointed a small business restructuring practitioner; (2) lockdown DPN — where the company has not lodged within 3 months, even appointment of an external administrator may not extinguish personal liability — payment is generally the only way out. Newly appointed directors can carry exposure for the company’s pre-appointment debts; the “30-day window” is not a simple “resign and you’re safe” rule — whether liability is avoided depends on whether the company has paid, entered VA, entered liquidation, or appointed a restructuring practitioner within that window, and whether the DPN is lockdown or non-lockdown.

Legal Reference: Statute: Taxation Administration Act 1953 (Cth) Schedule 1 Division 269

Quick Answer: In short: Four core rights: voting, dividends, return of surplus on winding up, and access to information.

Core rights of an ordinary shareholder: (1) voting at members’ meetings on prescribed matters (one share, one vote by default); (2) dividends pro rata to holding when declared; (3) return of surplus on winding up after debts are satisfied; (4) information — inspection of the register of members, receipt of annual financial reports, and reasonable information requests. In addition, minority members may seek relief from oppression under s 232 and bring statutory derivative actions under ss 236–237.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 9, 232, 236–237

Quick Answer: In short: By show of hands or by poll at a meeting, or by appointing a proxy. Significant matters require a 75% special resolution; ordinary matters require a simple majority.

Members’ meetings recognise two resolution types: (1) ordinary resolution — over 50%, used for routine matters such as election of directors and adoption of financial reports; (2) special resolution — at least 75%, used for significant matters such as amendment of the constitution, change of name, winding up, and capital reduction. Voting may be by show of hands (one vote per member) or by poll (one vote per share). Members may attend in person or by proxy; proxy forms must be lodged within the prescribed time (usually 48 hours before the meeting). Institutional investors typically rely on proxy advisers.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 249E, 250J, 250L

Quick Answer: In short: Ordinary shares have voting rights but rank behind on dividend and winding up. Preference shares rank ahead on dividend and winding up but generally have no voting rights.

Ordinary shares are the default class — voting rights and pro rata return of surplus on winding up. Preference shares enjoy priority on dividends and winding up — ahead of ordinary shareholders, often with a fixed dividend (debt-like) — but typically without voting rights, save on prescribed matters. Sub-types include cumulative (unpaid dividends accumulate), convertible (convertible into ordinary shares), and redeemable (callable by the company). VC investors regularly take preference shares to lock in downside protection during financing rounds, with conversion to ordinary at IPO.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 254A, 254G, 254J

Quick Answer: In short: The directors declare dividends, subject to three statutory tests. Dividends are assessable to the shareholder, but franking credits attached to franked dividends mitigate double taxation.

The dividend process: (1) the directors declare or determine the dividend; (2) the company must pass the three statutory tests — assets exceed liabilities (solvency), the dividend is fair and reasonable to shareholders as a whole (fairness), and payment does not materially prejudice the company’s ability to pay creditors (materiality); (3) the dividend is paid pro rata to holdings. Tax-wise, dividends are assessable to shareholders, but Australia’s imputation system attaches franking credits representing tax already paid by the company at 30% (or 25% for base rate entities), which the shareholder may apply to offset their personal tax. Fully franked dividends are particularly attractive to lower-rate shareholders.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 254T; ITAA 1997 Division 207

Quick Answer: In short: Tax paid at the company level “follows” the dividend through to the shareholder, who uses it as a credit against their own tax — Australia’s distinctive system for avoiding double taxation.

By way of example: a company earns 100 of profit, pays 30 in tax, and distributes 70 as a fully franked dividend. The shareholder grosses up to 100 (cash plus franking credit), reduces tax payable by the 30 credit. At a marginal rate of 47%, the shareholder pays a further 17 (47 − 30); at a marginal rate of 19%, the shareholder receives a refund of 11 (refundable franking credits for low-rate shareholders). The system explains the strong Australian retail-investor preference for high-yielding blue chips. Franking credits also flow through trusts to beneficiaries.

Legal Reference: Statute: ITAA 1997 Divisions 207, 208

Quick Answer: In short: Members may inspect the register of members, the register of officers, and the constitution. Inspection of internal financial records requires a court order on proof of “proper purpose”.

Member inspection rights operate on two levels: (1) statutory rights — the register of members, the constitution, and certain internal records the company is required to keep (s 168). Any member may inspect, and request copies. Note: since the Personal Property Securities Act 2009 took effect in 2012, security interests granted by the company are no longer recorded in the historical ASIC charges register — they are now searched on the PPSR; (2) internal financial records are generally not open to inspection — a member must seek a court order under s 247A, demonstrating that they are acting in good faith and for a proper purpose, such as investigating suspect transactions. In a Pty Ltd, members holding 5% or more may also requisition financial reports. Board minutes are typically not open to inspection.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 173, 247A, 293

Quick Answer: In short: Apply to the court for relief under s 232. The court can order a buyout, dividend payment, dissolution, or specific conduct.

Section 232 is one of the most powerful minority remedies: where the conduct of the company’s affairs, an act or omission by or on behalf of the company, or a resolution of members is oppressive, unfairly prejudicial, or unfairly discriminatory against a member (whether in their capacity as member or otherwise), the court may make a wide range of orders under s 233: (a) order the majority to buy out the minority; (b) amend the constitution; (c) order payment of a dividend; (d) appoint a receiver; (e) wind the company up. Common scenarios: controlling shareholders paying themselves high salaries while not declaring dividends, diverting profits to related entities, or diluting minority members. This is the most common cause of action in Pty Ltd disputes among family members and partners.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 232, 233; Re Spargos Mining NL (1990)

Quick Answer: In short: A member’s proceedings brought in the name of the company against directors or officers for harm to the company — subject to leave of the court.

At common law, members historically faced significant difficulty bringing proceedings to remedy harm caused to the company by insiders. Section 236 introduced the statutory derivative action: a member, former member, director, or officer may apply for leave to bring proceedings in the company’s name. Leave is granted under s 237 where: (a) it is probable that the company will not bring proceedings itself; (b) the applicant is acting in good faith; (c) it is in the best interests of the company; (d) there is a serious question to be tried; and (e) the applicant has given the directors at least 14 days’ notice. Once granted, proceedings are conducted in the company’s name as plaintiff.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 236–242

Quick Answer: In short: Directors may issue, subject to the constitution. Public companies are constrained by ASX Listing Rule 7.1 (≤15% in any 12-month period). For a Pty Ltd, pre-emptive rights apply only where the constitution, Replaceable Rules, or shareholders’ agreement so provides.

Pty Ltd share issue process: (1) directors resolve to issue; (2) where pre-emptive rights apply under the constitution or shareholders’ agreement, the existing members must first be invited to subscribe pro rata — pre-emptive rights are not automatic; the constitution and SHA must be checked; Replaceable Rule s 254D is only a default and may be displaced by the constitution; (3) shares not taken up by existing members may then be offered to new investors; (4) lodge Form 484 / Form 211 with ASIC within 28 days. Public companies must also comply with ASX Listing Rule 7.1 — capital raisings other than rights issues are limited to 15% of issued capital in any 12-month period (extended to 25% for smaller companies under Rule 7.1A); breach requires shareholder approval. VC rounds typically issue new shares that dilute existing holders, with anti-dilution mechanics designed in.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 254A, 254X; ASX Listing Rules 7.1, 7.1A

Quick Answer: In short: Vendor signs a Share Transfer Form, the directors approve the transfer, the register is updated. Stamp duty on share transfers is now uncommon, but landholder duty may apply where the company holds land.

Steps: (1) vendor completes a Share Transfer Form (standard or ASIC-recognised); (2) both parties sign; (3) the form is delivered to the company; the directors resolve to approve the transfer (the constitution typically gives the board discretion to refuse); (4) the company updates the register of members; (5) a new share certificate is issued to the buyer; (6) ordinary share transfers are now generally not subject to duty (NSW marketable securities duty was abolished, for example), but where the company holds land, landholder / land-rich duty may be triggered in Victoria, Queensland, and other jurisdictions. Each State’s Duties Act must be checked. Pre-emptive rights and consent constraints in the constitution and SHA must always be reviewed before structuring a sale.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 1071B, 1072F; Duties Act (each State)

Quick Answer: In short: Yes — subject to the procedures in Corporations Act Part 2J.1. Several types: equal access, selective, on-market, and others.

A share buyback allows the company to repurchase and cancel shares, achieving capital reduction, member exit, or per-share value uplift. Part 2J.1 prescribes five procedures: (1) minimum holding (odd-lot) buyback; (2) on-market buyback (listed companies, in market); (3) employee share scheme buyback; (4) equal access scheme (same terms to all members); (5) selective buyback (specific members — requires 75% special resolution and approval of those not participating). Common requirements: must not materially prejudice ability to pay creditors, prescribed disclosure, and ASIC lodgement.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 2J.1 (ss 257A–257J)

Quick Answer: In short: Yes — but the reduction must be fair and reasonable, members must approve, and creditors must not be materially prejudiced. The procedure is somewhat involved.

A capital reduction must (s 256B): (a) be fair and reasonable to shareholders as a whole; (b) not materially prejudice the company’s ability to pay creditors; (c) be approved by the members. Two procedures: (1) equal reduction — same proportion across all members of a class, requiring an ordinary resolution and notice; (2) selective reduction — particular members only, requiring a 75% special resolution and approval of the affected members. Disclosure to members and ASIC, and 14 days’ notice, are required. Capital reductions are commonly used in buyback exits, accumulated loss elimination, and capital structure rationalisation.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 256A–256E

Quick Answer: In short: Governance, transfer restrictions (pre-emptive, tag/drag), deadlock mechanics, exit provisions, confidentiality and non-compete, and remedies for breach.

A typical SHA (especially with external investors) includes: (1) board composition and nomination rights; (2) reserved matters — matters requiring member approval; (3) pre-emptive rights on issue; (4) tag-along / drag-along on sale; (5) right of first refusal on transfer; (6) lock-in for founders; (7) vesting of founders’ equity; (8) good leaver / bad leaver treatment; (9) deadlock mechanism (Russian roulette, Texas shootout); (10) exit / liquidity provisions on IPO or sale. The SHA must be read together with the constitution.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 140; common law contract

Quick Answer: In short: Tag-along: a minority can “tag” onto a majority’s sale on the same terms. Drag-along: a majority can “drag” minorities along on a sale to a third party.

Both clauses smooth the path to a sale: (1) tag-along — protects the minority. If the controlling member sells to a third party, the minority may sell its proportionate stake on the same terms, avoiding being left behind; (2) drag-along — protects the buyer and the majority. If members holding above the threshold (typically 50%, 67%, or 75%) accept an offer, the remaining members can be required to sell on the same terms, ensuring 100% acquisition. Both are standard in VC term sheets and increasingly common in Pty Ltd shareholders’ agreements.

Legal Reference: Statute: Common law / contract; embodied in the shareholders’ agreement

Quick Answer: In short: Companies grant equity-linked incentives to employees — options or shares, with start-up tax concessions available where eligible.

An ESOP is the standard incentive tool for start-ups. Common forms: (1) options (right to acquire shares at a future strike price); (2) restricted stock or shares with vesting. Under the default ESS rules, options are typically assessed for income tax at grant; however, the start-up concession (s 83A-33 ITAA 1997) allows eligible companies (unlisted, aggregated turnover under A$50m, incorporated for under 10 years, etc.) to defer the tax point to sale and apply CGT treatment. On the regulatory side, since 2022 the Corporations Act Part 7.12 Division 1A (introduced by the Treasury Laws Amendment (Cost of Living Support and Other Measures) Act 2022) sets out a dedicated employee share scheme regime, replacing the historical ASIC Class Order 14/1000 pathway. ASIC has confirmed that, since 1 March 2023, new ESS issues cannot rely on the legacy class orders. ESOP design typically requires member approval of the plan, with each grant approved separately.

Legal Reference: Statute: ITAA 1997 Division 83A; Corporations Act 2001 (Cth) Part 7.12 Division 1A; Corporations Act s 254A

Quick Answer: In short: Early stage typically uses SAFE / convertible notes; Series A and beyond uses preference shares with a shareholders’ agreement.

By stage: (1) pre-seed / seed — SAFE (Simple Agreement for Future Equity) or convertible note, deferring valuation to the next round; (2) Series A and beyond — preference shares under a detailed Subscription Agreement and shareholders’ agreement, with anti-dilution, liquidation preferences, and board seats; (3) late-stage / pre-IPO — structures approaching listed-company terms; (4) strategic investors — may use joint ventures, warrants, or other hybrid structures. Australian VC commonly uses AVCAL templates.

Legal Reference: Statute: Corporations Act 2001 (Cth); common law contract

Quick Answer: In short: Pre-money valuation sets the share price; anti-dilution protects investors — full ratchet (strong) or weighted average (typical).

Valuation terminology: pre-money valuation = company value before investment; post-money = pre-money + investment; price per share = pre-money / fully diluted shares outstanding. Anti-dilution adjusts the conversion price on a future down round (lower than the current round): (1) full ratchet — recalculates fully at the lower price, maximally favouring early investors and harshest on founders; (2) broad-based weighted average — weighted-average adjustment, the market norm (includes the ESOP pool); (3) narrow-based weighted average — a slightly stricter version. Pay-to-play provisions require existing investors to participate in subsequent rounds to retain anti-dilution.

Legal Reference: Statute: Common law / contract; embodied in subscription terms

Quick Answer: In short: Prepare a prospectus, ASIC review, ASX listing application, roadshow, pricing, listing — typically 6–12 months and several million dollars in cost.

Standard IPO process: (1) internal preparation — structure clean-up, three years of financials, board adjustments, lead manager engagement; (2) due diligence — bankers, lawyers, and auditors; (3) prospectus — the central document; lodgement triggers a 7-day exposure period (s 727(3)), which ASIC may extend by up to a further 7 days, for a maximum of 14 days; (4) ASIC review and ASX listing application; (5) roadshow with institutional and retail investors; (6) pricing and allocation; (7) listing and trading. Governing law: Corporations Act Chapter 6D (fundraising), the ASX Listing Rules, ASIC RG 228, and others. Directors bear personal liability for the contents of the prospectus.

Legal Reference: Statute: Corporations Act 2001 (Cth) Chapter 6D (ss 700–741); ASX Listing Rules

Quick Answer: In short: Continuous disclosure (Ch 3), related party (Ch 10), issue limits (Ch 7), and corporate compliance.

The ASX Listing Rules are the daily compliance bible for listed companies: (1) Chapter 3 — continuous disclosure, immediate disclosure of material information; (2) Chapter 4 — periodic reporting, half-yearly and annual reports, plus quarterly activity reports for mining companies; (3) Chapter 7 — share issue limits of 15% (extended to 25% for smaller companies); (4) Chapter 10 — significant transactions with related parties requiring shareholder approval; (5) Chapter 11 — significant changes to nature or scale of activities requiring shareholder approval. Breach of the Listing Rules is also a breach of s 793C of the Corporations Act.

Legal Reference: Statute: ASX Listing Rules; Corporations Act 2001 (Cth) ss 793C, 674

Quick Answer: In short: Acquiring above 20% in an Australian listed company, an unlisted Australian company with more than 50 members, or a listed registered managed investment scheme triggers Chapter 6 takeover rules — a takeover bid, scheme of arrangement, or other Chapter 6 exception is required.

Section 606 contains the “20% prohibition”: no person (with associates) may acquire voting power above 20% in (a) an Australian listed company, (b) an unlisted Australian company with more than 50 members, or (c) a listed registered managed investment scheme, unless one of the Chapter 6 exceptions applies. Common exceptions: (1) off-market takeover bid; (2) on-market bid; (3) scheme of arrangement; (4) on-market purchases under the 3% creep rule (3% in any 6-month period); (5) shareholder approval. Note: a Pty Ltd is itself capped at 50 non-employee members, so Chapter 6 generally does not apply to ordinary Pty Ltds. The rules are designed to give all shareholders an equal opportunity in a change of control. Disputes are generally heard by the Takeovers Panel.

Legal Reference: Statute: Corporations Act 2001 (Cth) Chapter 6 (ss 602–669)

Quick Answer: In short: A takeover bid is a public offer to shareholders, with a 50%+ acceptance threshold; a scheme is target-led through court process, generally requiring 75% by value and majority by number of those voting.

The two principal routes have distinct profiles: (1) takeover bid — the bidder makes an off-market or on-market offer, with 90% acceptance triggering compulsory acquisition. The process is longer (2–3 months), inherently adversarial, and target shareholders accept individually. (2) Scheme of arrangement — target-led, with court approval; typically requires approval in each class of 75% by value and a simple majority by number of those present and voting, plus court confirmation at a second hearing. The court has discretion to dispense with the majority-by-number requirement in some cases. Once approved, the scheme binds all members; suited to friendly transactions and privatisations, with comparable timing (2–3 months). Schemes are now the more common structure.

Legal Reference: Statute: Corporations Act 2001 (Cth) Chapter 6 (takeover); Part 5.1 (scheme)

Quick Answer: In short: Compulsory acquisition generally turns on a 90% threshold in voting power: in a takeover bid, reaching 90% allows the bidder to compel the remaining shareholders to sell, with dissenters entitled only to fair value.

Two compulsory acquisition regimes: (1) Part 6A.1 post-bid — in a takeover bid, the bidder reaches 90% voting power and (typically) 75% acceptance of the bid offers issued, then sends a compulsory acquisition notice to the remaining shareholders within the prescribed window; (2) Part 6A.2 general compulsory acquisition — a holder of 90% or more (with associates) can buy out a holding of less than 10%, subject to additional requirements including an independent expert report. Dissenting shareholders may object, with the court determining fair value — typically based on independent expert valuation. A scheme of arrangement results in 100% ownership automatically and does not require a further compulsory acquisition step.

Legal Reference: Statute: Corporations Act 2001 (Cth) Chapter 6A (ss 661A–669); s 667A (independent expert)

Quick Answer: In short: Government-related Chinese buyers require FIRB approval for almost all transactions; private investment depends on industry, transaction size, and asset type. FIRB thresholds adjust each 1 January — the official thresholds for the year of the transaction must be applied.

Whether a Chinese buyer requires FIRB approval depends on the buyer’s identity, transaction size, industry, asset type, and whether the transaction touches a national security business, land, agriculture, media, or critical infrastructure. The general framework: (1) private non-FTA investors — subject to monetary thresholds (adjusted annually on 1 January); (2) FTA partners (US, UK, NZ, Chile, Canada, Japan, Korea, Singapore, etc.) — typically benefit from higher thresholds; (3) foreign government investors (including SOEs, government-controlled or government-influenced investment vehicles) — many transactions are subject to zero or very low thresholds; (4) media, sensitive national security land, critical infrastructure, and national security businesses — typically zero threshold. Mainland Chinese SOEs and local government investment platforms are generally treated as FGIs by default; mixed-ownership entities with material State influence may also be classified as FGIs. Approval typically takes 30–120 days, sometimes with conditions (local director, capacity commitments). Specific thresholds change annually and should not be hard-coded into reference materials — always check the official Foreign Investment threshold table for the year of the transaction.

Legal Reference: Statute: Foreign Acquisitions and Takeovers Act 1975 (Cth); Foreign Acquisitions and Takeovers Regulation 2015

Quick Answer: In short: The company pays 25% / 30% corporate tax; dividends are paid to shareholders; the shareholder grosses up by the franking credit and pays at their marginal rate.

Australia’s imputation system: (1) the company pays corporate tax at 25% (base rate entity) or 30% on its profits; (2) on payment of a dividend, a franking credit is attached representing the tax already paid; (3) the shareholder grosses up — cash dividend plus franking credit equals the assessable amount; (4) the shareholder pays at the marginal rate, with the franking credit applied as an offset; (5) shareholders with a marginal rate below 30% may obtain a refund of unused franking credits. The system explains the strong Australian preference for high-yielding blue chip shares.

Legal Reference: Statute: ITAA 1997 Division 207 (including Subdivision 207-F)

Quick Answer: In short: Directors, executives, and substantial holders (above 5%) must notify ASX of changes in holdings; short-term trading is restricted.

Key disclosure obligations: (1) substantial holding notice (s 671B) — any person reaching 5%, or whose holding subsequently changes by 1% or more, must notify ASX within 2 business days; (2) director’s notification (Listing Rule 3.19A) — directors of a listed company must notify trades in their company’s securities within 5 business days; (3) insider trading windows — insiders may typically trade only during defined windows (after results announcements), with absolute prohibition during blackout periods; (4) beneficial ownership tracing (s 672A) — the company may issue tracing notices to identify beneficial owners.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 671B, 672A; ASX Listing Rule 3.19A

Quick Answer: In short: Incurring new debts while the company is unable to pay them — the director is personally liable for those debts and faces up to 15 years’ imprisonment for serious cases.

Section 588G is the cornerstone of Australian insolvent trading law: (a) the company is insolvent at the time the new debt is incurred, or becomes insolvent because of it; (b) at that time, a reasonable director would have suspected on reasonable grounds that the company was unable to pay its debts; (c) the director failed to prevent the debt being incurred — the director has breached the prohibition. The consequences: (i) personal liability for those debts (recoverable by the liquidator); (ii) ASIC civil penalty — up to the higher of 5,000 penalty units or three times the benefit obtained for individuals (per current penalty unit rates); (iii) up to 15 years’ imprisonment for dishonest breaches. This is one of the most common pitfalls for directors.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 588G, 588M

Quick Answer: In short: Cash-flow test — unable to pay debts as they fall due. Even if the balance sheet looks healthy, a cash shortfall is enough.

Section 95A defines solvency by reference to the cash-flow test: a person is solvent if they are able to pay all the person’s debts as and when they become due and payable. The Australian courts apply a cash-flow rather than balance-sheet test. Practical indicators: (1) the size of overdue and unpaid debts; (2) whether short-term liquid assets are sufficient to meet maturing liabilities; (3) the genuine availability of credit lines and related-party support. Re Lewis and Sandell v Porter are leading authorities. Wage arrears, tax arrears, rent arrears, and demand letters from multiple suppliers in succession are red flags — pause and seek restructuring advice immediately.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 95A; Sandell v Porter (1966) 115 CLR 666

Quick Answer: In short: A director who is taking a course of action reasonably likely to lead to a better outcome for the company than immediate liquidation, and who satisfies the conditions, is protected from insolvent trading liability for debts incurred during that course.

Section 588GA, introduced in 2017, provides a “self-help” pathway: where a director suspects the company may be insolvent but starts developing a course of action reasonably likely to lead to a better outcome (for example, restructuring, refinancing, or asset sales), debts incurred while pursuing that course do not constitute insolvent trading, provided the director: (1) appropriately seeks advice from a qualified entity; (2) keeps themselves informed about the company’s financial position, with proper books and records; (3) ensures the company is properly paying its employees’ entitlements (including superannuation); (4) substantially complies with tax reporting / lodgement obligations. Note that unpaid tax does not automatically defeat Safe Harbour, but it will affect the overall assessment by the liquidator or court of whether s 588GA is satisfied. If the conditions fall away or action is taken too late, Safe Harbour ceases to apply.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 588GA

Quick Answer: In short: A financially distressed company enters “VA”; an administrator takes control. A second creditors’ meeting is typically convened within 25 business days of appointment to decide whether to save, restructure, or liquidate.

VA is the restructuring on-ramp under Part 5.3A of the Corporations Act: the directors resolve (by majority) to appoint an independent administrator (who must be a registered liquidator), and the administrator immediately assumes full control. Statutory timetable (in business days): (1) Day 1 — administrator takes control and notifies creditors; (2) within 8 business days of appointment — first meeting, deciding whether to appoint a committee of inspection and whether to replace the administrator; (3) within 25 business days of appointment (30 in Christmas / Easter periods, extendable by the court) — second meeting; creditors vote to: (a) approve a DOCA; (b) place the company directly into liquidation; or (c) return the company to the directors (rare). A statutory moratorium freezes creditor enforcement during the VA period.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.3A (ss 435A–451D)

Quick Answer: In short: Three main types: members’ voluntary liquidation (MVL — solvent winding up), creditors’ voluntary liquidation (CVL), and court-ordered winding up.

Categories: (1) MVL — solvent winding up by the members (75% special resolution), with the directors signing a declaration of solvency, commonly used for exits and group restructures; (2) CVL — insolvent winding up, either following a creditor vote at the second meeting in VA, or by direct member resolution; (3) court-ordered — on application by a creditor, ASIC, or a member, with the court ordering winding up. Each form involves the appointment of a liquidator who realises assets, distributes in statutory order, and (if no surplus exists) closes out the company.

Legal Reference: Statute: Corporations Act 2001 (Cth) Parts 5.4, 5.4A, 5.5

Quick Answer: In short: Voluntary is internally driven (members or directors); court-ordered is externally imposed, usually on creditor application. Court process is slower and more expensive.

Comparison: (1) voluntary — faster (commences within weeks), lower cost, with the members or directors selecting the liquidator; an MVL also avoids the stigma of insolvency. A creditors’ voluntary liquidation results from a creditor vote in VA; (2) court-ordered winding up — a creditor (with a debt of A$4,000 or more, plus a 21-day statutory demand unpaid — presumption of insolvency) applies to court, with hearing typically 4–6 weeks later, and the court appoints the liquidator. Court process is more formal and supports investigations — suitable where fraud or serious dispute is in issue.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 459A, 459P, 491, 497

Quick Answer: In short: A creditor (debt of A$4,000+ following a 21-day unsatisfied demand), the company itself (member resolution), the directors, ASIC, and APRA.

Standing under s 459P: (a) the company itself; (b) creditors (including contingent or prospective); (c) contributories (members); (d) directors; (e) liquidators (already appointed); (f) ASIC; (g) APRA; (h) prudential regulators. The most common path: the creditor serves a 21-day statutory demand; non-payment or non-application to set aside leads to a presumption of insolvency under s 459C, supporting a court application for winding up. Important: where the demand is disputed, an application to set aside must be made within 21 days — otherwise all defences are lost.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 459C, 459P, 459E

Quick Answer: In short: Takes over the assets, realises them, investigates wrongdoing, distributes in statutory order, and ultimately closes out the company.

A liquidator is an independent registered liquidator appointed under the Corporations Act, with the following responsibilities: (1) take possession and control of all assets, liabilities, and records; (2) realise assets (sell equipment, recover receivables, sue debtors); (3) investigate past dealings and identify voidable transactions (unfair preference, uncommercial transactions, insolvent trading) and recover; (4) receive and adjudicate creditors’ proofs of debt; (5) distribute in statutory order; (6) report suspected breaches to ASIC; (7) ultimately deregister the company. Liquidators’ fees are paid in priority from realised assets (typically on a time-cost basis).

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 477, 478, 533

Quick Answer: In short: Secured creditors (against the secured property) → liquidator’s costs and statutory priority expenses → priority employee entitlements (wages, leave, retrenchment / redundancy) → unsecured creditors → members.

Waterfall priority (s 556, with s 561 governing the interaction between circulating assets and employee priority): (1) secured creditors enforce against secured property (with surplus and the position over circulating assets affected by s 561); (2) liquidator’s costs and statutory expenses; (3) priority employee entitlements — unpaid wages, annual leave, long service leave, retrenchment / redundancy, and similar; (4) unsecured creditors pari passu. Where assets are insufficient to satisfy employee entitlements, eligible employees may apply to the Fair Entitlements Guarantee (FEG): the FEG generally covers up to 13 weeks of unpaid wages, annual leave, long service leave, up to 5 weeks’ payment in lieu of notice, and up to 4 weeks’ redundancy pay per year of service — but the FEG does not cover unpaid superannuation guarantee. Where superannuation guarantee is unpaid, the ATO may issue a DPN to recover from directors personally.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 556, 561; Fair Entitlements Guarantee Act 2012

Quick Answer: In short: Secured creditors take priority over the secured property and may enforce independently. Unsecured creditors share the residual pari passu.

A secured creditor (typically a bank holding a real property mortgage, an equipment chattel mortgage, or a PPSR-registered security) holds priority in the secured property, may enforce independently of the liquidation, and surrenders only the surplus to the unsecured pool. The ATO is generally an unsecured creditor — subject to specific statutory mechanisms (such as DPN personal recovery) and dedicated arrangements for matters such as superannuation guarantee, the ATO does not automatically rank ahead of other unsecured creditors. The interaction between employee priority entitlements and secured creditors over circulating assets is governed by s 561 and requires separate analysis. Banks lending to SMEs commonly require both PPSR registration and a personal guarantee. Suppliers can protect themselves by retention of title clauses or by requiring security up front.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 471C, 442B; Personal Property Securities Act 2009 (Cth)

Quick Answer: In short: Yes — employees’ wages, leave, long service leave, redundancy and similar entitlements rank above unsecured creditors under s 556. Eligible employees may also apply to FEG for the shortfall (FEG does not cover superannuation guarantee).

Employee priority order under s 556(1)(e)–(h): (1) unpaid wages and superannuation contributions (s 556(1)(e)); (2) annual leave / long service leave (s 556(1)(g)); (3) retrenchment / redundancy / termination payments (s 556(1)(h)); (4) workers’ compensation and similar. The Fair Entitlements Guarantee covers eligible employees as follows: up to 13 weeks of unpaid wages, plus accrued annual leave, long service leave, up to 5 weeks’ payment in lieu of notice, and up to 4 weeks’ redundancy pay per year of service. FEG does not cover unpaid superannuation guarantee. After FEG payment, the Commonwealth steps into the employees’ shoes by subrogation and recovers in the liquidation. Director attention: unpaid superannuation guarantee may still be the subject of a DPN, with personal recovery against the director.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 556(1); Fair Entitlements Guarantee Act 2012

Quick Answer: In short: A creditor-approved restructuring agreement coming out of VA — the company continues trading, with creditors paid the rate set out in the deed (typically more than they would receive in liquidation).

A DOCA is one of the possible outcomes of VA (s 444A): the administrator puts a proposal to the creditors’ meeting, and approval requires a simple majority by both number and value. Common structures: (1) an investor injects capital in exchange for equity, with creditor debts compromised; (2) related parties or founders inject several million dollars, paying unsecured creditors X cents in the dollar; (3) staged repayment with debt forgiveness. Once executed, the DOCA binds all creditors (including dissenters). ASIC scrutinises related-party DOCAs for phoenix risk.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.3A Division 10 (ss 444A–455A)

Quick Answer: In short: A secured creditor (typically a bank) appoints a receiver on default to take control of the secured property. A liquidator winds up the entire company. The two roles are entirely different.

A receiver is appointed by a secured creditor under a security agreement (typically a General Security Agreement) following default, and takes control of the secured property to realise it for the appointing creditor’s benefit. The receiver owes duties only to the appointing creditor, not to other creditors generally. A liquidator, by contrast, conducts a company-wide winding up, distributing to all creditors in statutory order. A single company may simultaneously have both a receiver (over secured property) and an administrator or liquidator (over everything else). A common scenario: a bank takes control of an operating business and sells it as a going concern to a buyer.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.2 (ss 416–434J)

Quick Answer: In short: A payment to an unsecured creditor in the 6 months before liquidation that gives that creditor more than other unsecured creditors. The liquidator can claw it back and redistribute.

Section 588FA: a payment to an unsecured creditor in the 6 months before the relation-back day (commencement of VA or liquidation), where the creditor receives more than they would in a pari passu distribution and the company was insolvent at the time or became insolvent because of it, is an unfair preference. The liquidator can sue to recover the payment for redistribution. Common targets: small suppliers. Defences: the running account defence (where the overall trading relationship results in a net minimum balance over the period), and the good-faith defence (where the creditor did not know or have reasonable grounds to suspect insolvency).

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 588FA, 588FF

Quick Answer: In short: Manifestly non-commercial or undervalue transactions in the 2–4 years before liquidation that the liquidator can void — commonly the sale of assets to related parties at well under market value.

Section 588FB — an uncommercial transaction is one that a reasonable person in the company’s circumstances would not have entered into: typically, a sale of assets to a related party at well below market value, or the granting of security for related-party debts without consideration. The look-back period is 2 years (4 years where the counterparty is a related entity). Section 588FC — an uncommercial transaction occurring while the company was insolvent. The liquidator may apply to the court for a recovery order under s 588FF, restoring the asset or obtaining cash compensation. This is the principal protection against asset stripping in the lead-up to insolvency. Directors may concurrently face insolvent trading liability.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 588FB, 588FC, 588FE, 588FF

Quick Answer: In short: Deliberately moving assets, customers, and employees from one company to a near-identical “new shell” company, leaving the old company to die under its debts. Heavily targeted by Australian regulators.

Phoenixing is the practice of “flying” a business from one indebted company into a new one substantially the same, leaving the old company with no assets to distribute. The Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 introduced sharper tools: (1) anti-phoenix director-to-shareholder transfer prohibitions; (2) liquidator powers to recover creditor-defeating dispositions; (3) DPN extension to GST; (4) ATO power to retain GST refunds; (5) ATO power to retain BAS refunds and apply against unpaid debts. Repeat phoenixing leads to extended ASIC disqualification.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.7B Division 7B (ss 588FDB–588FE); Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020

Quick Answer: In short: Engage advisers early when distress arises; use VA / Safe Harbour and other proper pathways; do not sell assets to related parties at undervalue; maintain a paper trail for all transactions.

Practical safeguards: (1) on signs of distress, immediately engage an insolvency practitioner or lawyer and document the assessment; (2) any sale of assets to a related party must be supported by independent valuation, market comparison, full payment, and a written contract; (3) good-faith restructuring steps taken under Safe Harbour are protected; (4) where VA or liquidation is to follow, avoid unusual transactions in the months immediately preceding; (5) for any high-risk transaction, the board minute should explicitly record the rationale; (6) engage the ATO via a payment plan rather than ignoring the debt. Regulators now use cross-source data analytics, making concealment impractical.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 588GA (Safe Harbour); s 588FDB

Quick Answer: In short: Where the company has not remitted PAYG, GST, or superannuation, the ATO may issue a DPN; the ATO can recover from the director personally 21 days after the DPN issues. The “30 days” is not a simple “resign and you’re safe” rule.

The DPN is the ATO’s mechanism for recovering company tax debts directly from directors (Tax Administration Act 1953 (Cth) Schedule 1 Division 269): (1) non-lockdown DPN — where the company has lodged its BAS / IAS / SGC statement within 3 months of the due date but has not paid, after the DPN issues the director typically has 21 days to (a) cause the company to pay, (b) cause the company to enter VA, or (c) cause the company to enter liquidation or appoint a small business restructuring practitioner; any one of these may extinguish the personal liability; (2) lockdown DPN — where the company has not lodged within 3 months, even subsequent appointment of an external administrator may not extinguish personal liability — payment is generally the only path. Newly appointed directors may carry exposure for the company’s pre-appointment debts, and the “30 days” is not a simple “resign and you’re safe” rule — whether liability is extinguished depends on whether the company has paid, entered VA, entered liquidation, or appointed a restructuring practitioner within that 30-day window, and (in the case of a lockdown DPN) those steps may not assist. DPNs apply to directors generally, including formal directors and (in appropriate cases) de facto and shadow directors.

Legal Reference: Statute: Taxation Administration Act 1953 (Cth) Schedule 1 Division 269

Quick Answer: In short: Smaller companies: share sale or asset sale. Larger companies: schemes of arrangement, takeovers, mergers. Distressed companies: DOCA.

By size and status: (1) healthy private company — share sale (Share Sale Agreement) or asset sale (Asset Sale Agreement), with buyer due diligence and transfer; (2) listed company — takeover bid or scheme of arrangement; (3) group restructure — demerger, internal restructure, with ITAA 1997 Subdivision 615 / 124-M scrip rollover relief; (4) distressed — VA leading to a DOCA injection or sale; (5) cross-border — add FIRB approval and related-party tax planning. Tax, regulatory, and timing differences between the pathways are substantial; early legal and tax advice is essential.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.1, Chapter 6, Part 5.3A; ITAA 1997 Subdivision 615, 124-M

Quick Answer: In short: A scheme is a court-led restructuring agreement with members or creditors. Approval generally requires 75% by value and a simple majority by number in each class, plus court confirmation. It is used for acquisitions, restructures, and debt restructures.

Schemes of arrangement (Part 5.1) come in two forms: (1) members’ scheme — commonly used for listed-company acquisitions and privatisations; the target company drives the process, and the result is analogous to a member-approved merger; (2) creditors’ scheme — a distressed company and its creditors enter into a debt-restructuring agreement (analogous to a DOCA but more formal). Process: (a) the company prepares the scheme and an Explanatory Memorandum; (b) court approval is sought to convene meetings; (c) members or creditors vote — approval generally requires 75% by value and a simple majority by number in each class; (d) a second court hearing for confirmation; (e) lodgement with ASIC; (f) effective. Independent expert reports are typically required.

Legal Reference: Statute: Corporations Act 2001 (Cth) Part 5.1 (ss 411–415); Federal Court Rules

Quick Answer: In short: Australia has adopted the UNCITRAL Model Law — a foreign insolvency representative may seek recognition in the Australian courts, and vice versa.

The Cross-Border Insolvency Act 2008 incorporates the UNCITRAL Model Law on Cross-Border Insolvency into Australian law. A foreign insolvency representative may apply to the Federal Court for recognition as a foreign main or foreign non-main proceeding, with consequences including: (1) a freeze on enforcement against Australian assets; (2) consolidated administration of Australian assets; (3) transfer of Australian assets to the foreign main proceeding. Conversely, an Australian liquidator may seek recognition in mainland China, Hong Kong, Singapore, and elsewhere — whether recognition is available turns on the local law and any mutual recognition arrangement. The pathway to recognition in mainland China differs materially from recognition in Hong Kong or Singapore (for example, the Mainland-Hong Kong mutual recognition and assistance arrangements for liquidations differ from China’s general approach to foreign insolvency proceedings). Where foreign creditors are involved, multi-jurisdictional court coordination is required.

Legal Reference: Statute: Cross-Border Insolvency Act 2008 (Cth); UNCITRAL Model Law

Quick Answer: In short: Historically, companies granted floating and fixed charges over their assets; today these are unified through PPSR registration, with priority by date of registration.

Since 2012, the Personal Property Securities Act 2009 has replaced the old Corporations Act charges register. Any security interest over company personal property (chattels, equipment, receivables, intellectual property, shares) must be registered on the PPSR (Personal Property Securities Register), with the date of registration determining priority — “first in time, first in right”. Common security documents: General Security Agreement (GSA), Specific Security Agreement (SSA), and retention of title (ROT). An unregistered security interest may be void against a liquidator or administrator, or lose priority, on the company’s insolvency or external administration (s 267 PPSA) — PPSR registration is therefore a critical step for any secured creditor.

Legal Reference: Statute: Personal Property Securities Act 2009 (Cth) ss 19, 267; Corporations Act 2001 (Cth) s 588FL

Quick Answer: In short: Banks, landlords, and major suppliers commonly require directors to give personal guarantees; if the company defaults, the creditor pursues the director personally — bypassing limited liability.

A personal guarantee is the most common mechanism for “piercing” limited liability in SME lending: a bank lending to a Pty Ltd will require the director to give a personal guarantee, so that on default the bank can pursue the director personally, potentially extending to the family home. Beyond banks, commercial leases, equipment leases, and large supplier credit lines often require personal guarantees. Before signing, consider: (1) whether the guaranteed amount is appropriately capped; (2) whether related companies are included; (3) whether there is a sunset; (4) whether the spouse must also guarantee. Once given, a personal guarantee survives the company’s liquidation.

Legal Reference: Statute: Common law / contract; Banking Code of Practice

Quick Answer: In short: Possibly. Insolvent trading, personal guarantees, DPNs, and other misconduct do not disappear with the company.

Even after deregistration, a director may have continuing personal exposure: (1) insolvent trading recovery — the liquidator may sue for the increase in debts during the period of insolvent trading; (2) personal guarantees — the guarantee survives independently of the company; (3) DPN — the ATO may pursue for some time after deregistration; (4) civil and criminal sanctions for breach of duties — ASIC may proceed independently; (5) disqualification — 5 years to life; (6) reputational and credit consequences. The closure of the company is not, by itself, the end of director exposure.

Legal Reference: Statute: Corporations Act 2001 (Cth) ss 588M, 206A–F; Tax Administration Act 1953 Schedule 1 Division 269

Quick Answer: In short: Yes — a company deregistered by ASIC may be reinstated, with assets and liabilities restored. ASIC administrative reinstatement applies only in limited circumstances; complex matters typically require court application.

Deregistration arises in two ways: (1) ASIC strike-off (unpaid annual review fees, suspected shell company); (2) liquidator deregistration (on completion of liquidation). Reinstatement pathways under s 601AH: (a) ASIC administrative reinstatement — available only in limited circumstances (typically where ASIC made an error in deregistering, or the company should not have been deregistered); (b) court reinstatement — where the deregistration followed a liquidation, or the matter involves limitation periods, asset recovery, insurance claims, or other complex disputes, application must usually be made to the court, which must be satisfied that reinstatement is “just”. On reinstatement, the company is generally treated as if it had never been deregistered: assets and liabilities are automatically restored, and members and directors resume their positions. Common uses include retrieving forgotten bank balances, insurance proceeds, or land registrations.

Legal Reference: Statute: Corporations Act 2001 (Cth) s 601AH