Checking up on a company
If you're thinking of dealing with a company or investing in one, it often pays to check the public record for recent documents that the company has sent ASIC. (Companies have legal obligations to send us certain documents and keep company details up to date.)
Documents on the public record can offer revealing information, especially about companies whose activities are not often reported in the newspapers or closely followed through the securities exchange.
Here's how you can run some safety checks on ASIC's company records to answer some important questions about a company. Of course, while our records may be only the start of your enquiries, they can save you time.
How to check the public record
Do a company name search, using our 'National Names Index' . Some companies have similar names, so you may need to check the 'Australian Business Number' or 'Australian Company Number' to see that you have the right one. When you find the company you want, scroll down and you will see the words:
| 'These are the documents that ASIC has most recently received from this organisation. Page numbers are shown if processing is complete and the document is available for purchase.' |
Keep scrolling and you'll see a list of documents. And there's also a link below this short list to 'Complete Document Listing' which links you to their earlier documents.
The lists of documents will often tell you enough for you to decide if there's anything of interest. However, you may also need to purchase documents through one of our information brokers or service centres.
Six basic questions to ask yourself
With the results of your National Names Index search in front of you ask yourself the following questions.
1. How long has the company been in business under its current name?
The list of documents shows you the names of the documents sent to us, including whether any company name changes have occurred.
This may give you some idea about the history and stability of the company.
2. What's the company's status? Is it registered, deregistered or under external administration?
Deal only with a registered company.
If it's deregistered, then the company can't legally operate. If it's under external administration (shown as EXAD in your search), you know that it has run into financial trouble and you should be cautious about dealing with it.
3. Has ASIC imposed a 'stop order' or 'interim stop order' on any of the company's offerings of securities (including shares, debentures, unsecured notes, options)?
A stop order (either interim or final) means that we considered the prospectus failed to say something important to potential investors and, in the public interest, we made an order that stopped the company from going ahead. If the problem is fixed through a supplementary or replacement prospectus, the order will be lifted or 'revoked'.
Stop orders can present a dilemma for potential investors. On the one hand, if they are later lifted the prospectus presumably now tells you everything you reasonably need to know. On the other hand, if something important had been left out in the first place, were the company's directors sufficiently careful and diligent to look your money? To answer this dilemma, you may need either to dig more deeply before plunging in or else find another investment.
4. Has the company or director offered an enforceable undertaking to ASIC?
We accept enforceable undertakings from directors and companies when we have reason to believe that they may have broken the law. In an enforceable undertaking, a company or a company director undertakes that they will stop the particular conduct or alleged breach and will not recommence the conduct. For example, a director may undertake to stop acting as a director or taking part in the management of a company for a certain time.
An enforceable undertaking indicates a past problem. It may now have been fixed, but if it's relevant to your interest in the company, you may wish to investigate further.
Copies of enforceable undertaking documents are available on our ASIC website.
5. Has the company sent ASIC any financial details?
If the company is a small proprietary company, it doesn't have to prepare or send financial statements to ASIC. Small proprietary companies are prohibited from offering shares to the public or from running investment schemes offered to the public.
If it's a large proprietary company, a public company, a disclosing entity, or a registered investment scheme, it should have sent ASIC financial statements within 4 months after the end of their financial year (3 months for a disclosing entity or registered scheme). You can purchase copies of financial statements sent to ASIC from one of our information brokers or service centres.
6. Are any of the directors disqualified from acting in management?
If you know the directors' names, you can also search the register of disqualified directors to check if any director is disqualified from managing a company.
A disqualified director is a strong danger signal. If the search says 'NIL return' it means the directors haven't been disqualified.
Four questions that delve a little deeper
To find out more about a company you are thinking of investing in, you may need to pay for a special search or for some company documents. Our information brokers or staff at our service centres can help you.
7. Who are the directors and company officers?
How long have they been with the company?
This information will give you more clues about the company's stability. New management and new directors may mean fresh ideas, but frequent changes can point to problems. The company may not be stable, and it may have inconsistent management policies.
If the person you are dealing with seems to be in charge of the company but they aren't a listed director, this could be a warning sign. Check whether they are disqualified as a director (see Question 6).
8. What other companies are the directors and company officers involved in? Are any of these failed companies?
You can pay for a 'personal name search' on the directors and company officers to see what other companies each person is involved in.
This may help you form an opinion of their business background. If the directors have been involved in other failed companies it could be a strong warning sign.
9. What's the company's share capital?
Is it a $2 company or does it have more capital?
$2 companies are not necessarily a bad risk, but $2 may be all the members have put in to fund a company's operations. The amount that members are willing to invest suggests how much risk they're willing to accept in backing the business.
10. Who are the members of the company?
The names and details about the members will tell you more about who is behind the company.
Company Alert
We also offer a free service, called Company Alert, that sends you an email every time a company you're interested in sends us documents.
For major listed companies that send us a lot of documents, like banks, this could be too much information. But for smaller listed companies that don't attract a lot of media coverage or for unlisted public companies, Company Alert may be useful to you.
Listed public companies
If the company you're interested in is a listed public company on the Australian Securities Exchange (ASX) you can also visit the ASX website and check their ‘Company Announcements’ information which lists documents received by the ASX. These documents are also on our database.
Company safety checks: summary
Some of the following links take you to pages on our main ASIC website.
1 Free company check on ASIC’s National Names Index
For information on company names and documents lodged search National Names Index
2 Free check for names of disqualified directors
Search Banned & Disqualified Persons List: Choose 'Disqualified persons'
3 Purchase information about directors, company officers and share capital
Contact an information brokers or an ASIC service centres
4 Set up a free Company Alert profile:
Set up a Company Alert profile now
5 Visit ASX website if it is a publicly listed company:
Choose ‘Company announcements’ on the ASX website
More information
FIDO Website: Printed 03/18/2010
