Company Law: Proprietary Ltd Company

Question:

Discuss about the Company Law for Proprietary Ltd Company.

Answer

Introduction

Proprietary Ltd Company

Several steps are needed to be followed for formation of a Proprietary Ltd Company.  The rules of ASIC are needed to be fulfilled for forming a company in Australia. Firstly, for registering name of a company, it is necessary to choose a company name which is not similar to other registered company’s name. Secondly, the companies address should be mentioned in the registration form. There should be a consent plan of the company. The officeholder’s legal obligation is needed to be mentioned. Before company registration, an Australian Company Number (ACN) and an Australian Business Number (ABN) is provided by government which shows the individual identity of the company (Asic.gov.au, 2016). In a proprietary Limited Company of Australia there are many directors but as per Corporation Law of Australia, one director should have his residence in Australia. More than 50 there should be not shareholders of the company. The method governed by Australian Securities and Investment Commission (ASIC) are followed in registration process of the proprietary ltd company.

An example of registration for has shown below:

If a director is appointed by the company the following details are to be mentioned-

If the company is limited by shares the following data related to preference shareholders can be mentioned-

According to section 117 of Corporation Act 2001 the registration process of the company is followed (Austlii.edu.au, 2016). It is very essential that company registration should be done otherwise question can rise on the validity of the company (Ecompanies.com.au, 2016). Under section 150 of corporation act exemptions are found. There is also declaration of special resolution for 14 days which is processed under section 233 of corporation act with adaptation of constitution’s regulation (Austlii.edu.au, 2016).

Some replaceable rules are also functioned under company act of Australia following the section 134 and section 135. As per section 134 of Company Act of Australia, regulations of replaceable rules are undertaken following the regulations of section 134 (Austlii.edu.au, 2016). The company’s regulations are governed by the replaceable rules of section 134. Repeal of constitution on modification of the rules of the company after 1^st July 1988 is undertaken following section 135 of Company Act of Australia (Austlii.edu.au, 2016).

In Proprietorship Ltd Company, various sections have worked on restrictions of shares. Various rights of shareholders are distributed following section 254 of Corporation Act 2001 (Austlii.edu.au, 2016). As per section 254A (2) of Corporation Act 2001, various rights are attached with the shares which is incorporated with Cumulative and Non-Cumulative dividends, Capital repayment, Profit participation of assets with dividend share and surplus (Legislation.gov.au, 2016). According to section 254A (3) of Corporation Act 2001, it is declared that liability of redeemed condition is expressed by the shareholders for approving replaceable rules, company registration process and share redeem regulations (Austlii.edu.au, 2016).

Requirement of the Sections Below in Corporation Act 2001

Section 198A

According to Section 198A of Corporation act 2001, the director of the company needs to manage the rules of the Company. This law falls under director duty with responsibilities. In absence of the proprietor of the company, the managing director has to take the decisions and participate in the work of the company (Austlii.edu.au, 2016). There are various exceptional rules under section 198E which the director of the company needs to follow. Company’s functions are exercised on the plan of the director and if any problem occurs then the liability will come on the director.

For establishing the duty of the director, section 198 of Corporation Act 2001 is incorporated in Australian company’s law. A company’s implications and authorities falls under the rules of the corporation Act. There should be a managing director who guides the rules of the company to various employee of the company. It is essential to exercise the company’s work and programs, so this section is made. To follow the systematic functions and performance of a company this sections was required to make.

Section 191

According to Section 191 of Corporation Act 2001 a director has various responsibilities. Among them, personal interest of the financial and non financial assets of the Company is needed to protect by the director of the company. If the director is unable to fulfil his responsibility of saving the material disclosure process than any serious problems may be faced by the employees of the company. The extent of the notice of interest is needed to be saved by the company’s director. As the liability comes on the director, so if he does not take care of the liquidated and unliquidated assets of the company then, under section 6.1 of criminal code of Company’s law the director have to give civil penalty for the loss of the company. The liability and role falls under Director Duty (Austlii.edu.au, 2016).

It is essential that there should be an individual who should balance and look after the interest, shares and the assets of the company. So as per Corporation act 2001, the director is allotted with this responsibility, as he is the main management of the company. So Section 191 is incorporated in the Australian Corporation Act 2001 for the benefit of the company.

Section 250R (2) & (3)

According to section 250R of Corporation act 2001, in regulation of AGM a business meeting is organized of Annual General Meeting (AGM). In that meeting board of directors are present. The annual financial report of the company, audit reports and director report is stated in that meeting. Auditor’s remuneration in appointing the members and electing director through voting system is followed by the method of Section 250R of Corporation Act 2001 with various resolution procedures.

According to section 250R (2) of Corporation Act, remuneration report various names of listed proprietor companies are reported in Annual General Meeting and reports of the companies are checked and further planning is development of the company is discussed in that meeting.

The voting process and resolution process is followed under section 250R (3) of Corporation Act 2001 and no obligation can be stated against that (Austlii.edu.au, 2016).

The section 250 R (2) and section 250R (3) of Corporation Act 2001 of Australia is incorporated in the rules of the company to take decisions for the election process, resolution process and remuneration process of the company. This acts rules are mandatory to be followed in every proprietorship company for taking management decisions of the company. 

References:

Asic.gov.au. (2016). Starting a company | ASIC - Australian Securities and Investments Commission. [online] Available at: http://asic.gov.au/for-business/starting-a-company/ [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/ [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 117Applying for registration. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s117.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 134Internal management of companies. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s134.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act  2001 - SECT 135Replaceable rules. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s135.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 198APowers of directors (replaceable rule--see section 135). [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s198a.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 233Orders the Court can make. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s233.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 254APower to issue bonus, partly-paid, preference and redeemable preference shares. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s254a.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 254Redemption must be in accordance with terms of issue. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s254j.html [Accessed 21 Sep. 2016].

Austlii.edu.au. (2016). Corporations Act 2001 - SECT 250RBusiness of AGM. [online] Available at: http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s250r.html [Accessed 21 Sep. 2016].

Ecompanies.com.au. (2016). PTY LTD Registration - Register A PTY LTD - Companies Australia. [online] Available at: https://www.ecompanies.com.au/company-registration/pty-ltd-registration/ [Accessed 21 Sep. 2016].

Legislation.gov.au. (2016). Corporations Act 2001. [online] Available at: https://www.legislation.gov.au/Details/C2013C00003 [Accessed 21 Sep. 2016].

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