Mitchell Harding, current as of: 29 August 2024.
ASIC allows individuals to register companies directly through their portal without the need for third party assistance. Since December 2022, ASIC has reported a steady rise in the market share of company registrations from 14.5% to 17.1%. This, along with the fact that ASIC has outperformed the market in terms of growth in relation to company registrations consistently month on month – even when the overall market has contracted, shows that people are shifting away from engaging professionals to register companies and are attempting to register these themselves directly through ASIC.
A key reason why we are seeing ASIC outperform the market and consistently take a greater portion of the market share is due to the significant rise in the cost of living within Australia. Over this 20-month period, the Consumer Price Index and the Employee Living Cost Index have soared to peaks that have not been reached since the Global Financial Crisis in 2008. Due to this, consumers are cutting costs where possible and see registering a company directly through ASIC as a means of doing this potentially because they do not understand the value of engaging a professional to incorporate companies for them.
Although the initial cost of registering a company directly through ASIC may be cheaper, it is important for clients to understand that the post-registration costs may become more costly than engaging a professional to register their company initially. This is because they may be in breach of several legislative requirements which are set out in the Corporations Act 2001 (Cth) (‘the Act’) and would be required to resolve these issues once brought to their attention.
There are several pieces of documentation that are legally required to be prepared prior to a company being registered. Section 117 of the Act states that an applicant must have in writing, among other things, the following:
Another key requirement under the Act in section 1071H is that the company must within a two month period of issuing a shares, provide the holder of the shares with all of the relevant documents including a certificate of issue over the security.
Furthermore, section 169 of the Act requires that a register of members must contain the member’s name and address along with their date of entry as a member. If the company has share capital, the register must also provide the date on which the allotment took place, the class of shares, the number of shares for each allotment, the amount paid and unpaid on the shares and their serial numbers and certificate numbers.
Importantly, although a constitution is not legally required, if a company was to decide to adopt a constitution upon registration, each person who consents to be a member is required under section 136(1) to provide written consent agreeing with the terms of the constitution prior to lodgement.
If individuals decide to incorporate a company directly through ASIC rather than engaging a third party, they will ultimately only receive a certificate of registration. If registered through ASIC, ASIC assumes that the company already has the relevant written consents for each officeholder, to occupy a premises where the company is not the occupier of the premises, share certificates and a register of members. ASIC do not provide any documents which would satisfy the company’s legislative requirements above nor do they provide a company constitution. This means that the company would be required to adhere to the replaceable rules or later adopt a constitution. There is little guidance from ASIC through the steps to register a company, including which structure would be best for the company being registered. If individuals who incorporate their company directly through ASIC do not abide by the Act obtaining relevant documentation, the company would be liable.
A company that fails to have fully signed, written consents to act/consent to occupy a premises that the company is not the occupier of faces strict liability in accordance with Section 6.1 of the Criminal Code Act 1995 (Cth). This means that there is no proof required for the prosecution to prove criminal intent, and the onus of proof is on the company to prove they have the relevant consents to satisfy their legal obligations. Guidance provided by the Australian Government suggests that for offences of strict liability, a maximum of 60 penalty units appears to be reasonable. This means that if clients do not comply and the company is found to be strictly liable, it could be charged up to $18,780 in penalties. If the client does not meet any of the other requirements set out above, for example being unable to produce a register of members when requested, the company could face a fine, and in default of the company’s ability to pay this, its officers. If a client does not receive specific advice on the company structure and incorporates a company with the incorrect structure due to the lack of professional guidance, correcting this may be a costly exercise due to potential capital gains and duty.
Not all hope is lost if a client does come to you or your firm with just a certificate of registration in hand for their registered company. Acis provides a service that we call ‘Company Document Pack’. This is tailored to provide the following documents for a company:
This is for situations like the abovementioned or if all company related documents have been lost or destroyed in a natural disaster for example. Ordering this through Acis will give you and your client the peace of mind that the company is abiding by the legislative requirements set out in the Act and that the company and its directors can produce the relevant documents to avoid monetary penalties for non-compliance with the Act.
Ultimately, we are seeing ASIC’s market share of companies being registered in Australia steadily rise. We put this down to the fact that individuals are looking to minimise costs where possible due to the cost-of-living crisis Australian’s are facing and the fact that registering a company directly through ASIC appears cheaper than going to an accountant or other third party. As we have unpacked in this article though, ASIC’s fee to register a company is cheaper because they only provide a certificate of registration and no other legally required documents. ASIC assumes that the client has obtained these documents prior to engaging them directly. With the little guidance provided, the individuals incorporating their companies are expected to know this, and are expected to obtain all necessary consents, certificates and registers prior to incorporation. If they do not do this, the company and in default, the officers of the company could be found liable and face monetary penalties.
Here at Acis, we provide peace of mind when incorporating companies, we provide all of the relevant documents to be kept with the company register (e.g. consents to act) and provide guidance through our human-to-human experience to assist with any questions or concerns that you or your client may have. We also provide documents such as a company constitution, which we tailor to the client’s specific requests. With regard to the registration of companies, we have also recently developed technology which supports digital document signing for all the relevant documents required under the Act to streamline the process of incorporating companies through Acis. If, however, a client has already established their company and never held the legally required documents upon incorporation or these were lost or destroyed after registration, we can assist with this via a Company Document Pack which can be ordered through our platform.
Don’t hesitate to contact us if you would like to discuss any of these or other matters further.
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