Most companies in Australia are Proprietary companies. Proprietary companies are denoted by the words “Pty Limited” or “Pty Ltd” and most small and medium businesses in Australia conduct their business affairs through proprietary companies.  In brief, the major differences between public and proprietary companies are: 

• proprietary companies must have at least 1 shareholder but no more than 50 non-employee shareholders (public companies must have at least 1 shareholder); 
• proprietary companies must have at least 1 director who must ordinarily be resident in Australia (public companies must have at least 3 directors – 2 of whom must ordinarily be residents in Australia);  proprietary companies cannot engage in any activity that would require the lodgment of a prospectus (except for an offer of shares to existing shareholders or employees); and 
• proprietary companies are not required to appoint an auditor.

REGISTRATION 

A company comes into legal existence when it is registered with the Australian Securities and Investments Commission (ASIC) and on and from the date of registration a registered company is deemed to have certain characteristics. 

In particular, companies have a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. Although companies do not have a physical existence, they have the same powers as individuals including the power to own and dispose of property, sue and be sued, and enter into contracts. 

Some of the other key elements of a company include: 

• continuous existence until the company is either wound up or deregistered;
• the directors and shareholders of the company; and
• limited liability of shareholders.

The process of registration can be outlined as a process of four steps. 

STEP 1 – SELECT A NAME 

The first step in the registration process is to ensure that the proposed company’s name is available and suitable for registration. A search of the ASIC’s name database can ascertain whether a name is available for registration.  A company name must indicate the company’s legal status. In particular, a proprietary company must include the word “Proprietary” or the abbreviation “Pty” in its name.  Some other types of names are not available. The Corporations Regulations list words and names which cannot be used in company names without Ministerial approval. These include words such as “building society”, “trust”, “university”, “chamber of commerce” and “chartered”, as well as words suggesting a misleading connection with Government, the “Royal Family” or the Sydney 2000 Olympics. The aim of such restrictions is to ensure that a company’s name does not mislead as to the company’s activity or purpose. The ASIC may also refuse to register names which are offensive or suggestive of illegal activity.  

Reserve a company name (optional) 

You may reserve a company name before a company is registered, if the name is available. If you wish to ensure that the name cannot be taken by another company until you are ready to register it as a company then you must complete and lodge ASIC form 410 – Application for reservation of a name, with the prescribed fee (currently $35).  If the application is approved, the name will be reserved for a period of two months. The application will only be rejected if the name is: 

• identical to a name reserved or registered for another corporation or a name already listed on the national business names register; or 
• of a kind declared by the Corporations Regulations to be unacceptable for registration (see above).

If you choose not to reserve a name, simply apply for the name on the ASIC form 201 – Application for registration as a company. A names availability test will be conducted by the ASIC upon lodgement of the form 201 and the ASIC will register the name as a company if the name is available and suitable.  

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