Proprietary

What is a Proprietary ?

A proprietary company is the most popular type of company used in Australia as it is the most appropriate company structure for small . A proprietary company’s name will end with the abbreviation ‘Pty Ltd’, which stands for ‘Proprietary Limited’.

What does ‘Proprietary’ mean?

‘Proprietary’ means that a limited number of shareholders own the shares in the company and that the company cannot offer its shares to the general public. This limits the company in its ability to raise capital as it is unable to sell its shares to raise money. This is in contrast to a which ends with the abbreviation ‘Ltd’ at the end of its name. A public company allows for an unlimited number of shareholders to own its shares and can offer its shares to the general public, including listing itself on the Australian Stock Exchange (‘ASX’). Importantly, stricter regulations apply to a public company compared to proprietary company i.e. significant accounting and reporting obligations.

What does ‘Limited mean’?

‘Limited’ means that a shareholder’s legal responsibility for the company’s debts/liabilities is only limited to the number of shares they hold. For example, if company MV Pty Ltd becomes insolvent, its shareholders will only lose the money they spent to purchase their shares – if partly paid then the shareholders will need to pay the remainder money owing for those shares. This is in contrast to a company limited by guarantee where its members agree to guarantee X amount of liability to the company upon becoming members.

What are the requirements for a Pty Ltd company?

As of 1st July 2019, a Pty Ltd company is required to:

 Pay the appropriate one-off fee of $495 to the Australian Securities & Investments Commission (‘ASIC’);  Continue to pay the annual review fee of $267 on the anniversary of the company’s incorporation;  Have a registered office and principal place of business (this can be the same address);  Have at least one director who ordinarily resides in Australia;  Have at least one shareholder (this can be the same person as the director);  Director/Shareholder(s) must be 18 years and over;  A secretary is not required, however if appointed then they must be 18 years and over and reside in Australia;  Limited to a maximum of 50 members/shareholders by any legal entity (person, company or incorporated association);  Have chosen the appropriate class of shares and detailed the same within its constitution (e.g. ordinary shares, A to F class shares or G and H class shares);  Prepare and submit financial reports and directors’ reports for each financial year, including ASIC’s requirements to audit the company’s accounts (note this will only apply to ‘Large’ proprietary company – a large proprietary company must be at least two of the

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following, annual revenue is $50 million or more, has assets of $25 million or more, or has 100 employees or more); and  Directors must comply with the ‘director’s duties’ as set out in the Act 2001 (Cth). Business names and company names

A company can have both a business name and a company name, both which are required to be registered with ASIC. A company name is used on all legal documents and is followed with either the words ‘Proprietary Limited’ or the abbreviation ‘Pty Ltd’. Typically, a company can use a business name without the Pty Ltd abbreviation.

A business name allows a company to trade with that specific name and does not have to be the same as the company name. To use a business name, the company must register the same with ASIC and pay the applicable fees. As of 1 July 2019, one year is $36 and three years is $85 (note a company cannot register a business name already taken). A company can have multiple business names linked to its Australian Business Number.

For advice regarding company and business structures please contact Bowden McCormack on 08 8941 6355 or email the writer at [email protected]

The above summary is based on the law as at 27 August 2019..

It covers the relevant legal matter in a general way and is intended for information purposes only rather than as specific legal advice.

Bowden McCormack does not assume any duty of care in relation to this document and specific advice should be sought and obtained in relation to one's own circumstances before taking any action on the matter addressed in the summary