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Types of Australian Companies

April 27, 2020

Proprietary Limited Company

A proprietary limited company is a form of privately held company within Australia that is commonly used for conducting business. The minimum requirement to establish a company is that there must be a minimum of one director and one shareholder.  According to the Corporations Act 2001 (Cth) a proprietary company cannot have more than 50 non-employee shareholders or engage in fundraising or selling its shares to the public.

At least one of the directors needs to reside within Australia and be over the age of 18 years.

Proprietary Companies – Limited by Shares

These are usually smaller than a public company and generally are referred to as private companies or shelf companies. There can be between one and fifty shareholders, yet raising money by selling shares to the public is not permitted. Being ‘Limited by Shares’ literally means that the liability is limited to the value of the shares of the company.

Small businesses predominately use a private company for their trading as a means to identify and differentiate their brand from their competitors.

There is a requirement for a minimum of one director and one shareholder.  At least one of the directors must reside in Australia. According to Corporations Act 2001 section 204A, a secretary is not required any longer.

Public Companies

Public companies are permitted by law to raise money from the public by offering their shares for sale, usually listing them on the share market. The people who purchase these shares are called shareholders. You can recognise a public company because it must put the word ‘Limited’ or the abbreviation ‘Ltd’ after its name.

Public companies must have a minimum of three directors and at least one secretary. Two of the directors and the secretary are required to be residents of Australia.

Proprietary Companies – Limited by Guarantee

A company ‘Limited by Guarantee’ is often the preferred structure used by sports clubs who are ‘non-trading’ businesses. The shareholders must ‘Guarantee’ in writing the amount they are willing to contribute to the company should the company be unable to meet its debts.

Special Purpose Companies – SMSF Trustee

There are times where there is a requirement for a special type of company to be used for a specific purpose. One type of special purpose company is a Self Managed Superannuation Fund Trustee company. For this to be classed as a special purpose company, a provision within the company’s constitution needs to be included and upon registration of the company, ASIC needs to be notified that the company’s sole purpose is to act as the trustee of the SMSF.