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Your company and the law

This information sheet explains the responsibilities of company officeholders. It covers:
If you’re a director or secretary of a small company, you must follow the requirements set out in the Corporations Act 2001 (Corporations Act).

Obviously we can’t explain every obligation or cover every situation here. At times you may need professional legal advice.

Even if you appoint an agent to look after the company’s affairs, you—not the agent—may still be held responsible for those legal obligations.

Are you a small business operator?
Find out more about your obligations

Is your company registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC) ?
If so, some of your reporting obligations to ASIC will no longer apply. See here for details.

What does the law expect of you personally?

As a director, you must: If you have personal interests that might conflict with your duty as a director, you must generally disclose these at a directors’ meeting. This rule does not apply if you are the only director of a proprietary company.

What work must a director do?

You and any other directors will control the company’s business. Your company’s constitution (if any) or rules may set out the directors’ powers and functions.

You must be fully up-to-date on what your company is doing: Only be a company director or a company secretary if you are willing, able and have enough time to put in the effort.

Avoid any company where someone offers to make you a director or secretary on the promise that ‘you won’t have to do anything’ and ‘just sign here’. You could be exposing yourself to many legal liabilities.

Can you sell shares to the public?

Proprietary companies are generally not allowed to raise money from the public by selling shares. Avoid anything to do with illegal fundraising.

Can anyone be a director or secretary?

You must not act as a director or secretary (or manage a company) without court consent if you:
If you become bankrupt, enter into a personal insolvency agreement or are convicted of a relevant offence at a time when you’re a director or secretary then you automatically lose that office. The company must then notify ASIC that you’re no longer a director or secretary of the company. For more information, see Information Sheet 14 Bankruptcy and personal insolvency agreements (INFO 14).

ASIC can also ban you from being a company director in certain situations.

If you’re not allowed to be a company director or secretary, you’re not allowed to manage a company. It is a serious offence to set up dummy directors while you really manage the company.

Directors must also be 18 years or older.

What happens to dishonest directors?

Every year, the courts send dishonest and reckless company officers to prison, and impose heavy fines and award damages.

As the company watchdog, we investigate corporate crime. You can report dishonest company directors to us. We may take a number of steps against directors who fail in their duties.

What company records must you keep?

As a director, the law makes you personally responsible for keeping proper company records.

You must see that the company keeps up-to-date financial records that:
All companies must have financial records so that:
If your company is a ‘small proprietary company’ or a small company limited by guarantee (as defined in the Corporations Act), it will generally not have to prepare formal financial reports under that Act each year and lodge them with ASIC. However, you must still keep financial records, and may need financial reports for managing and monitoring your company’s financial position and performance for tax purposes or for raising finance.

In most cases, large proprietary and public companies—even not-for-profit public companies—will have to prepare financial reports, have them audited and lodge them with ASIC.

Some public companies limited by guarantee are exempt from these financial reporting obligations and others have reduced auditing and reporting obligations. For more details on the obligations of limited by guarantee companies, see Information Sheet 131 Companies limited by guarantee—simplified obligations (INFO 131).

What are financial records?

Some of the basic financial records that the law may require a company to keep are:
A company would also normally prepare the following statements regularly (e.g. monthly) to manage its business performance and provide to lenders:
Get professional advice if you have any doubt about the content or type of financial records to keep. The lists above give examples only, because the financial records you need will vary from company to company.

You may keep some financial records electronically, but you must be able to convert them into hard copy so that you can give them to anyone entitled to inspect them. Make backup copies of electronic records regularly (for example, weekly or daily).

See also Information Sheet 76 What books and records should my company keep? (INFO 76).

Your company must also keep some other basic records: see ‘Company housekeeping: other records and registers’ for more details.

Company housekeeping: Other records and registers

All company officers must make sure that the company attends to some basic ‘housekeeping’ matters. The directors remain ultimately responsible for the company’s compliance with the Corporations Act.

When a company is set up, you must:
Make sure that you:
Your company must keep:
For more about the ASIC forms your company must lodge, see Information Sheet 20 Checklist for registered companies and their officers (INFO 20).

Your annual statement

Each year within a few days after your company’s review date (usually the anniversary of your company’s registration) we will send your company an annual statement to one of the following:
If you have not received your annual statement within five days after the review date, you should contact us.

Check your annual statement

The annual statement sets out the company’s details recorded in ASIC’s register, such as the names and addresses of its directors and secretary, registered office, principal place of business, ultimate holding company (if any), share details and members’ details (members’ names and addresses only apply to proprietary companies)..

If these details are correct and no other changes have occurred that require you to notify ASIC, then within two months after the review date:
If any details on the statement are no longer correct, you must update them using Form 484 Change to company details. You have 28 days from the statement’s issue date to lodge the form.

We may also require information to be lodged (e.g. where we notice that data is missing).

Pay fees

To avoid the payment of late fees or other non-compliance action you must:
For more information, see Information Sheet 3 Annual statements and late fees (INFO 3).

Pass a solvency resolution

The company’s directors must pass a solvency resolution within two months after the company’s review date, unless the company has lodged a financial report with ASIC within twelve months before the review date.

A positive solvency resolution means that the directors think that there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. You don’t have to lodge notification of a positive solvency resolution with ASIC, but you must pay the company’s annual review fee. Payment of the fee is taken to be a representation by the directors that the company is solvent.

A negative solvency resolution means that the directors think that there are not reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. If the directors pass a negative solvency resolution we must be notified using Form 485 Statement in relation to company solvency within seven days after the resolution has been passed.

If the directors don’t pass a solvency resolution within two months after the company’s review date, ASIC must be notified using Form 485 within seven days after the end of the two-month period following the review date.

Keep us informed of changes in your company’s details

Some of the more common things you must tell us are set out in the following table. The Corporations Act requires you to tell us about these changes within a certain time period. If you tell us after this time, you may have to pay a late fee.
Type of activity or dutyForm
Change place you keep registersIf you want to keep registers of shares, options or charges at an address other than the company’s registered office or principal place of business, you must tell us where they are being kept within seven days after the change.
Change of officeholders or details of officeholdersIf the officeholders (e.g. director, secretary or alternate director) of the company change, or if any personal details change, such as their residential address, you must tell us within 28 days after the change. You must also lodge the terms of appointment when appointing an alternate director.
Resignation of director or secretaryA director or secretary can tell us directly if they retire or resign. A copy of their letter of retirement or resignation from the company must be submitted with the form.
Change of registered officeIf you change the company’s registered office or principal place of business, you must tell us within 28 days after the change.
Change of company nameIf the company has resolved to change its name, you must tell us within 14 days after the resolution was passed. (New names are subject to availability criteria.)
Issue of new sharesIf you issue new shares, you must tell us within 28 days from the date of issue.
Change to members (shareholders)Proprietary companies must advise us within 28 days of changes to the top 20 members in each class of share held. Such changes include changes of name and address, increase or decrease in shares held and cessation of membership.
Changes to ultimate holding companyProprietary companies must advise us within 28 days following changes to their ultimate holding company.
Division or conversion of sharesIf you divide or convert shares into different classes, you must tell us within 14 days from the date of the division or conversion.
Negative solvency resolutionYou must notify us of a negative solvency resolution within seven days after the resolution is passed.
Solvency resolution not passedIf no solvency resolution is passed within two months after the review date you must notify us within seven days after that period.
Change of company review dateYou may apply to change your company’s review date if it is considered unsuitable. You must, however, be able to satisfy certain conditions to have the review date varied.

How do you get the information to us?

If you are a director or secretary of a company you can tell us about most changes to your company’s details using our online service.

Alternatively, if you lodge documents on behalf of a number of companies, you can lodge them electronically using our EDGE service which uses compliant software..

By lodging electronically you will:
You may also lodge the changes on a paper form. These forms can be downloaded from our website or obtained by calling us on 1300 300 630 .

If you use a lot of forms, interactive software is available, such as ‘ASIC Forms on CD-ROM’.

We also list the fees you must pay for lodging some forms on our website.

Send the completed form and fee (where applicable) to:

What if your company can’t pay its debts?

You must ensure that your company is able to pay all of its debts as and when they become due for payment. A company is ‘insolvent’ if it cannot pay all of its debts as they become due and payable.

By law, you must prevent your company from incurring a debt when it is insolvent or about to become so. This means you must consider whether you have reasonable grounds to believe that the company will be able to pay a new debt when it becomes due, as well as pay all the other debts.

You may expose yourself to criminal prosecution, substantial fines or to action by a liquidator, creditors of the company or ASIC to recover amounts lost by creditors due to your actions.

Your personal assets—not just your company’s—may be at risk.

Common signs of financial trouble are:
If your company is in financial difficulty or in danger of being insolvent, seek immediate advice from an insolvency professional. They will be able to explain your options to you. Your options may include re-structuring your company’s affairs, changing your company’s activities or appointing a voluntary administrator or liquidator to the company.

Do not assume that you will be able to trade out of the problem. Delay could be damaging to the company and to you personally, and may reduce the options available.

How do you close down your company?

You can apply to have the company deregistered, if certain conditions are met, using Form 6010 Application for voluntary deregistration of a company.

The conditions are that the company: If these conditions are not met, the process is more complex and you’ll need the help of a professional adviser.

What can you find out about other companies?

See Information Sheet 26 Dealing with businesses and companies: How to avoid being swindled (INFO 26) for tips on avoiding shonky operators and fly-by-night companies.

You can find out more about a company you are dealing with by checking its identity to make sure that it really exists. You can check its status and see what forms it has lodged through the Organisations & Business Names search Opens new window at ASIC Connect..

Tell us if you think another company is trading while it can’t pay its debts. We may not be able to investigate everything, but we do keep detailed records of all reports of misconduct and may take action if we have evidence of serious wrongdoing. Tell us if you think that a company director is acting dishonestly.

A final word and to find out more

Finally, you are unlikely to get into trouble if you:

Where can I get more information

For more about running your company, visit www.asic.gov.au/companies.

Contact ASIC on 1300 300 630 or make an enquiry at www.asic.gov.au/question.

This is Information Sheet 79 (INFO 79). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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