Can Australian Companies Have Foreign Shareholders?

Have you ever wondered if your Australian company can have foreign shareholders? The short answer is yes! 

Your company’s foreign shareholders can either be foreign individuals or foreign companies. 

But before you proceed with adding them to your company, it’s critical to know what role foreign shareholders can play at your Australian company, whether they can be company directors, do they need to be residents and more. 

Read along as we walk you through the ins and outs of having non-foreign shareholders in your company.

What is a Foreign Shareholder?

To begin, company shareholders (or members) are those who own part of a company through shares. Shares are units of ownership. There are several ways to become a shareholder: 

• Companies can issue shares to their members
• If you create a new Australian company and become the sole member
• When shares are transferred to you by an existing company shareholder ( normally for a fee) and the transfer of shares is registered by the company through the Australian Securities and Investments Commission (ASIC)

All Australian companies require at least one shareholder, your company’s shareholder can be someone who lives overseas. It’s important to note that your company must register with ASIC. 

Registering a company will require you to provide the following details: 

• A suitable name for your company that isn’t already taken and shows its legal status
• The name and address of your shareholder(s)
• The name and address of your director(s)
• The location of your registered office 
• The principal place of your business
• The names and addresses of the initial share capital holders

What does your Australian company require?

• Your company must have an Australian Director and an Australian business location 
  • All your directors are legally required to have a Director Identification Number
• If you have a public company, you’re required to have a company secretary, but this isn’t required for a proprietary company
• A company registration form
• A director’s consent and a share application 
• Your company requires its own Constitution. However, you also have the option to use “Replaceable Rules” that are contained in the Corporations Act 2001 (Cth)
  • Company constitutions must outline:
    • Director and shareholder roles
    • Director and shareholder rights and responsibilities
    • The rules governing meetings of shareholders and directors as well as other internal management activities.
  • Replaceable rules are a set of basic rules you can use to manage your company

A foreign entity or foreign person can become a shareholder of your company as soon as it begins trading for your company that’ll require you to change the details of your company to include the new member. You must also notify ASIC of the change if you have a proprietary company however, this isn’t required of public companies.

A foreign person or company can own an Australian company’s entire shares. However, the company must have at least one director residing in Australia.

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What is a Foreign Company Shareholder?

Similarly to a foreign individual, a foreign company can register an Australian company and become a shareholder of the company. However, if your Australian company’s sole shareholder is a foreign company, the status of your company may change. 

The foreign company may be treated as the parent company, and your Australian company may be treated as a holding company or a wholly-owned subsidiary of the foreign company. Foreign companies may enjoy tax benefits if they consolidate the holding company with its other businesses. This is known as a Tax Consolidated Group.

Foreign companies may have additional requirements when they are shareholders in an Australian company. For e.g. some foreign investments in the company must receive prior approval from the Foreign Investment Review Board. Approval may be needed for real estate investments or investments exceeding $10 million AUD. 

If your small proprietary company is owned by a foreign company, you are required to file annual financial statements with ASIC.

Can your company have Foreign Directors?

Your company can have foreign directors, but there are some rules about who can be a company director. Let’s go through them! 

Section 201A of the Corporations Act contains rules that will affect the number of foreign directors your company can have. 

1. Firstly, if you have a proprietary company, at least one of your directors must be residing in Australia.

• Therefore, if your proprietary company has a foreign director, they can’t be your only company director.

2. If you have a public company, you must have a minimum of three directors, with at least two residing in Australia. 

• In this instance, your third company director can be a foreigner.

3. There is one exception to the rules outlined above. If an individual has a dual residency, this allows them to be an ordinary resident of more than one country at a time.

• For instance, an individual could be an Australian resident who’s the sole director of a proprietary company whilst being a citizen of another country at the same time.

What else do you need to know?

• Foreign shareholders have the same rights as domestic shareholders
• Legally there is no minimum age your company shareholders have to be. However, you can set a minimum age for your company
• Anyone can become a company shareholder
• If your foreign shareholder is also a director of your Australian company, they must be at least 18 years old
• If you have a proprietary company, you can’t have more than 50 shareholders. However, there is no limit on the number of shareholders a public company can have
• You must send your shareholders a copy of your company constitution within seven days of receiving their written request
• As a company director, you must hold a general meeting when shareholders with 5% of meetings votes make a request

Conclusion

Now that you know that your Australian Company have foreign shareholders, your company can continually expand and enjoy the benefits of having foreign shareholders. If you’re still unsure about how your company can have foreign shareholders, you can always talk to a lawyer for more legal advice.

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