The Corporations Act 2001 (Cth) is the main law that regulates Australian businesses. It sets out legal guidelines that companies may follow. However, some aspects are flexible and it allows for replaceable rules that companies can change. Despite this, there are baseline rules that can not be adjusted.
Who Can Be a Shareholder?
A shareholder must be a person, company or government (e.g. State of NSW). There is no minimum age for a person to be a shareholder. However, a company can create its own rule for a minimum age requirement. Additionally, estates and trusts must nominate an executor or trustee if they wish to hold shares.
When issuing shares, it’s important to note the limit of shareholders that apply to a company. Firstly, all companies must have at least one shareholder. Proprietary companies can only have a maximum of fifty shareholders that are not employees of the company. If a company has no shareholders, ASIC can apply to a court to have a company wound up.
Foreigners
Foreigners can hold shares of an Australian Company. Similar to an Australian shareholder, a Shareholders Agreement is needed. This is a contract negotiated by shareholders and is not governed by the Corporations Act. Rather, it outlines their rights, responsibilities, obligations and liabilities and covers matters beyond the company’s constitution.
It’s also important to keep in mind that if you intend to be a director, you may have to “ordinarily reside” in Australia, depending on the company type. A private/proprietary company must have at least 1 director, and they must ordinarily reside in Australia. Whereas for a public company, there must be at least 2 directors, with 2 ordinarily residing in Australia. Read Can I Be A Company Director If I’m Not An Australian Citizen?
It’s important to note that foreign shareholders should familiarise themselves with Australian laws that may be different. This is especially important when meeting tax requirements.
The Process of Registering a Shareholder
When issuing shares, a record must be kept of all shares they’ve issued. This is known as ‘the register’ or ‘share register’. This must have information about the company’s shareholders and the number of shares they own in the company. The register must record all changes. Also, a company must notify ASIC within 28 days after issuing a share, by lodging a change to company details.
The register must contain information about a shareholder’s:
- name and address
- date their name was added to the register
- the shares held by each person
Ultimately, it seems almost anyone can be a shareholder. However, it’s important to note that shareholders are not liable for the Company’s debts except for any amount unpaid on shares. Therefore, when issuing shares, it may be smart to consider the financial stability of the shareholder.
Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
