Proprietary limited companies (denoted by the words “Pty Limited” or “Pty Ltd”) are the most common type of business structure used by small business in Australia.  The legislation governing proprietary companies is the Corporations Law. The operation of this law is overseen and administered by ASIC. 

A company comes into legal existence when it is registered with ASIC. On and from the date of registration the 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. 

The primary advantage of conducting a business through a company is that it confers limited liability on its shareholders. That means shareholders of a company are not liable (in their capacity as shareholders) for the company’s debts. The only obligation placed upon shareholders is to pay any amount unpaid on their shares if they are called upon to do so.  

CHARACTERISTICS OF PROPRIETARY COMPANIES 

Registration with ASIC 

To set up a new company, an applicant must apply to ASIC for registration of the company.  

A proprietary company must have at least 1 shareholder and at least one director and secretary (all of whom may be the same person). 

When a company is registered with ASIC it comes into legal existence and obtains separate legal identity distinct from that of its owners, managers and employees. Once it is incorporated a company has its own rights, its own property and its own obligations. 

Use of your company name and ACN 

When a company is registered with ASIC it obtains an Australian Company Number (or ACN). An ACN is a unique 9 digit number allocated by ASIC to each company. 

A proprietary company must also have the words “Proprietary Limited” as part of its name, which can be abbreviated to “Pty Limited” or “Pty Ltd”.  A proprietary company must legibly display its company name and its ACN on: 

• every public document issued, signed, or published by or on behalf of the company;
• every negotiable instrument (for example cheques and promissory notes) signed by or on behalf of the company;
• all documents lodged with ASIC; and
• the common seal (if the company chooses to have a common seal).

In some circumstances, a company can now use its Australian Business Number in place of its ACN. 

Directors and Secretaries 

The directors of a company are responsible for managing the company’s business. A company must appoint at least one director and one secretary who lives in Australia. As stated above, the same person may act as both director and secretary.

A person cannot act as a director or a secretary if the person: 

• is under 18 years old;
• is an insolvent under administration;
• has been convicted of any serious offences as specified in the Corporations Law; or
• is banned by a court or ASIC from managing a corporation. 

If you are a director you must ensure that you are honest and careful at all times and ensure you know what the company is doing. 

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