Company Law & Trusts
Company law governs the formation of companies, the legality of company mergers and acquisitions, as well as shareholder rights. In addition, this area of law encompasses the governance and regulation of businesses.
The Corporations Act sets out strict rules for how to start, run, and close a company. Every incorporated entity in Australia must comply with the Corporations Act, and the directors of the company have serious obligations to discharge their responsibilities according to the legislation.
Whether you are a sole director/shareholder, or the head of a multinational, good corporate governance is essential to operate effectively in a highly regulated environment. We provide strategic advice to help owners and executives understand their obligations under the Corporations Act and to navigate complex and sensitive commercial issues to achieve focused outcomes.
Company Registration and Formation
When starting a business, one of the first questions is which business structure is most suitable. Many businesses can operate successfully as sole traders. This allows a business owner to offer services or sell goods, employ staff, and perform most business functions. A sole trader is responsible for all decisions and losses in a business, and they report any business income in their personal tax return.
Setting up a business as a company offers the business owner more legal and financial protection. A company is a separate legal entity to the business owner. It must have at least one shareholder (owner) and one director (who runs the business). Any income or losses incurred by the company belong to the company, and both the shareholders and directors are generally insulated from any losses.
However, this does not mean that company directors have no obligations. A director is responsible for a company and has positive obligations (things that must be done, even if no one complains) and the personal penalties for deliberate breaches of a director’s obligations can be severe.
One of the first steps in company registration is choosing a name. The owner should check the proposed name against existing businesses to ensure that it is available. However, registering a company name with ASIC does not protect the name against third party claims for trademark infringement. Anyone registering a company should check the proposed company name does not infringe on an existing registered trademark by using IP Australia’s Trade Mark Search database.
There are a number of different forms of trusts which are used by individuals and businesses to achieve different outcomes. Trusts are a frequently misunderstood area of law. Even those who have trusts often do not fully understand them, incurring significant fees unnecessarily, and failing to use the trusts to their full advantage.
A family trust is a discretionary trust set up to hold a family’s assets or to conduct a family business. Generally, they are established for asset protection or tax purposes. By contrast, a unit trust is a legal structure that holds assets for the benefit of unit holders. A trustee administers the trust, makes decisions about trust assets and is responsible for distributing income and capital according to the number of units each investor holds. Any profits made by the trust must be distributed to unit holders at the end of the financial year.
A trust must be compliant and effectively managed in order to achieve its intended purpose. We can work with you to ensure your trust is property structured, compliant, and tailored to your specific objectives.
A business must pay superannuation for its workers to provide for their retirement. An employer who fails to pay the correct amount of super is liable to make up the shortfall, pay interest on the amount, and an administration fee. If the employer does not comply with the ATO’s directives in relation to superannuation, the company directors may be personally liable for significant fines or even imprisonment.
All workers must receive at least the “superannuation guarantee”, a minimum percentage (currently 10.5%) of base earnings. This amount is invested for their retirement on their behalf. The super guarantee rate will gradually increase until it reaches 12% in July 2025. This applies to full-time, part-time, and casual workers.
Self-employed people – such as those who are sole traders – are responsible for their own retirement planning. Many self-employed people choose to provide for their retirement through investments other than superannuation (such as buying real estate). Other self-employed people choose to make voluntary contributions to an existing superannuation fund that is open to self-employed people. Still others will establish a Self-Managed Superannuation Funds (SMSF), either for themselves or for their families.
It is important to note that self-employed people who operate their business under a company structure are required to pay themselves the super guarantee.
We have a wealth of knowledge and practical experience in commercial, company and trust law and have been trusted advisors to a range of individuals and business clients for many years.
If you need assistance, contact one of our lawyers at [email protected] or call (08) 9336 6300 for expert legal advice.