MEMORANDUM

Issue

The issue that is up for discussion is whether ABC company should register as a foreign company operating in Australia or operate as a local company.

Rule

The law that is applicable in relation to incorporation is the Companies Act 2001 and the Australian Securities and Investment Commission regulations.

Analysis of Facts and the Law

A company upon incorporation under Australian laws gets perpetual succession meaning the company gets to become a separate legal entity as outlined under the celebrated case of Salomon v Salomon. For the company to register a new company then it must meet the requirements put in place under the Corporations Act 2001 .The company will also be governed by ASIC.The relevant provision that is applicable where the law allows membership of the company under to be any person whether natural or a company which can become a shareholder. The first step is to ensure that the name of the company is not taken. Secondly is to get the written consent of the persons required to act as the directors of the company. The consent of the directors and the person designated to act as the secretary must be obtained before the process of applying for registration. The company as outlined in Collins v Zenike Australia Pty Ltd could be termed as acting in breach.

The benefits that come from ABC registering as a company under the Act is that it becomes a spate legal entity meaning that the assets and the obligations of the company become distinct from the personal obligations of the directors and shareholders. Through incorporation a company gets perpetual succession meaning that the company continues to operate even after the death of its founders. The membership of the company may change but that does not in any way affect the existence and operation of the company.Upon registration the liability of the persons operating the company becomes limited meaning that the directors of the company will not be held liable for the debts of the company unless there are conditions that exist to warrant lifting of the corporate veil.

Secondly another option that the company may consider is the registration of a foreign company under Australian laws. Under the Companies Act 2001,a foreign company operating in Australia  is a company that is incorporated outside Australia but seeks to operate  in Australian territory. For one to register such a company it is necessary to ensure that the name of the company is available and submit form 402 which is a requisite form for foreign companies together with the documents applicable and fees payable.

Once the company gets registered the ASIC will issue such company with a registered body number and the company will hence be expected to comply with all the applicable laws in relation to maintenance of a registered office in the country together with requirements on the display of the company name. An advantage that comes from operating such a company is that they do not necessarily have to bring all its operating into the locality as they can operate through a local agent that will be responsible for ensuring all the requirements under the Companies Act are attained. The disadvantage that comes from incorporating such a company is that it is placed under a separate regime that is applicable for foreign bodies as opposed to local companies. They do not have to be incorporated in the country and are therefore not required to undertake registration under the Incorporation laws applicable. However, it is necessary for the locals that deal with such companies to understand about the financial and status of the company.

Conclusion

Therefore, the most preferable option that would be suitable for ABC would be to incorporate itself as a local company instead of a foreign company operating in the country. The reason behind the option is to ensure that it affords all the local protections that such companies enjoy and operate under the Companies Act and the registration regime that local companies use under the Companies Act 2001.

Footnotes

Australian Securities and Investment Commission

Collins v Zernike Australia Pty Ltd – [2006] WASC 67

Companies Act 2001

Macaura v Northern Assurance Co Ltd [1925] AC

Re Noel Tedman Holdings Pty Ltd (1967) Qd R 56

Salomon v A Salomon & Co Ltd [1896] UKHL 1, [1897] AC 22

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