Proprietary Companies

The vast majority of companies incorporated in Australia are proprietary companies.

Proprietary companies which have the word "Proprietary", or more commonly, "Pty" in their names are exempted from many company law rules that are designed to protect investors who do not participate actively in the operation of businesses.  As most Australian companies are small businesses, actively managed by their owners, most are proprietary companies.

Requirements:

1. Proprietary companies are not permitted to have more than fifty (50) shareholders (excluding shareholders who are employees.)  The minimum is one.

2. Proprietary companies are not permitted to offer shares or undertake fundraising activities to the public at large.

Proprietary companies are divided into classifications of "large" or "small".  Large proprietary companies are those that satisfy any two of the following criteria:

• Where consolidated and operating revenue exceeds A$10 million

• Where consolidated and gross assets exceed A$5 million

• Where the company and its controlled entities have 50 or more employees

Small proprietary companies are therefore those that do not meet any two of the three criteria listed and are relieved of certain financial reporting requirements in their Annual Returns under the Corporations Act and are not required to hold Annual General Meetings.  (These concessions reflect the Government's desire to ease the regulatory burden applying to small business).

Shelfcom provides all of its Proprietary companies with a Constitution which has been drafted by lawyers specialising in company law.  Proprietary companies need not have a Constitution and  may rely on the "replaceable rules" as contained in the Act, however:

1. By having a formal document applicable to the company itself, contained in one document, simplifies the internal management of the company.

2. Many institutions and people with whom a company may deal are still not aware of the fact that an Australian proprietary company does not need a Constitution, so it avoids problems in that area if they are insisting on a copy prior to doing business with a company.

3. Our Constitution empowers the company to issue varying classes of shares with varying attributes, privileges and obligations (eg. shares with dividend entitlements but no voting entitlements).  The "replaceable rules" do not provide for such flexibility.

4. Shelfcom also provides as a matter of course, a Common Seal for the company.  Again under our Act a Common Seal is no longer required however again this is not widely known.  Our Constitution gives the directors further flexibility with regard to the Common Seal by stating that the company may or may not have a Common Seal and if it does it may or may not (at its discretion) affix the Seal to a document being executed on behalf of the company.

Shelfcom can provide:

1. Shelf companies that have already been incorporated that have never traded for clients requiring a company immediately.

2. Shelf companies as per 1. above with an Australian Business Number ("ABN").  This enables such a company to commence trading immediately and be legally able to issue invoices with GST added.  (An ABN application may take up to 28 days to be processed by the ATO).

3. Companies incorporated specifically for a client with their own choice of name, provided the name is not identical to an existing company name or a registered business name, not owned by the proposed shareholders.

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