Having a business requires having to invest in its security and its growth. Sometimes, the most difficult part is deciding what tools to invest in. Having your business protected legally is one of the most sound and proactive investments to make, which is why commercial law is so important.
Essentially commercial law serves to manage business and commercial transactions, covering aspects such as reviewing contracts, overseeing business deals as well as potential litigious threats.
Although certain aspects of commercial law can be self-managed, the field is continually evolving, with legal practices changing extremely rapidly. That’s why we ensure that our commercial lawyers in Parramatta are kept up to date with the latest developments within the industry, to ensure that your business is fully protected.
Barwick Boitano Commercial Lawyers Parramatta takes pride in maintaining a high standard of knowledge and expertise within the commercial law sector in order to provide our clients with the highest quality services.
COMPANIES – CORPORATIONS ACT 2001
As with individuals a company is recognised as a separate legal entity under the Corporations Act 2001 (the Act).
As a separate legal entity a company may sue or be sued and contract with another party just as an individual. Although there are different types of companies which may be incorporated under the Act the most common type of company is a proprietary limited company (maximum: 50 shareholders) otherwise known as a private company.
REGISTRATION AND ACTIVITIES
On registration of a company in the Australian Securities & Investments Commission (ASIC) a Constitution is lodged which regulates the conduct and affairs of a company. A Constitution shall prescribe the manner in which a company shall undertake its corporate activities (e.g. affixing of company seal, conduct of directors meetings etc.). Once registered you have a proprietary right in the company name within Australia and no other company or business name substantially the same can be registered without the consent in writing of the company.
Apart from the Constitution of a company regulating the internal activities of a company the Act prescribes how a corporation may act at law. A company may enter into contracts for the sale or purchase of land by executing a contract under common seal or a third party may assume that a company has authorised directors to sign a contract without the seal (Sections 127 and 129 of the Act).
A company’s day to day affairs are conducted by the directors. As a company is a legal entity in its own right the director/s of a company shall only be personally liable for the acts of a company in limited circumstances (e.g. insolvent trading under the Act). Otherwise, a company is responsible for its own acts and omissions and any liability of shareholders is limited to any unpaid capital on shares owned by the shareholders.
As a result of amendments and commencement of the Corporations Act 2001 (formerly the Corporations Law) a company since 2001 is permitted to have a sole director (previously minimum of 2 directors). Although the directors of the company are responsible for the day to day conduct of the company the ultimate control of the company rests with the shareholders who have the power to appoint or dismiss directors.
COMPANY AS TRADING ENTITY
Prior to determining whether a company is the appropriate structure to acquire property or undertake a business you should consult with your accountant as to the benefits or disadvantages arising from utilisation of a corporate structure rather than the alternative business arrangements (e.g. sole trader; discretionary trust).
Apart from the apparent benefit of limited liability by trading as a company the other benefits which arise by utilising a proprietary limited company involve:
A company survives the death of a director or shareholder (perpetual succession);
A company is an entity which may be sold by the transfer of shares;
A company may distribute profit by way of dividend at its discretion;
Lower tax rate may apply;
A company may raise capital by the issue of shares or a charge over shares by way of security.
Notwithstanding the benefits associated with utilising a company as the trading entity the pros of operating as a company must be contrasted with the cons.
As a separate entity application must be made for an ABN and the company shall have liabilities (e.g. taxation);
Greater regulation over company (i.e. reporting responsibilities to ASIC);
Loss of personal control of company (i.e. decisions made by Board of Directors rather than individual);
Costs associated with registration and continuation of company (i.e. Incorporation, Annual Returns).
DEALING WITH COMPANIES
If dealing with a company you should ensure that a search is undertaken of the ASIC to ensure that the company is duly registered. An ASIC search shall disclose the current directors, shareholders, registered office and whether the company’s assets are encumbered by way of charge.