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What are the different types of companies that can be registered with ASIC?
A company can either be registered as “public” or “private”. You would register a public company with your company name. ASIC would register your company with the word “Ltd” after it. A public company is able to raise equity directly from the public via the issuing of shares.
Similar to a public company, you would register a private company with your company name. ASIC would register the company with the word “Pty Ltd” after it. A private company can only raise finance through people directly associated with the company (i.e. existing shareholders and employees). A private company cannot advertise for members of the public to invest in them. Further, there is a limit of 50 non-employee shareholders. A private company cannot engage in conduct that would require compliance with Ch 6D of the Corporations Act 2001 (Cth).
What rules does a public company have to abide by?
There are additional rules which apply to public companies compared to proprietary companies. These include the following:
- A public company requires the production of financial reports twice a year.
- They have to appoint an external auditor in order to comply with financial rules.
- A public company requires the appointment of three directors.
- You need to have a meeting to pass a resolution.
- A public company requires to hold an Annual General Meeting unless the company has only one member.
- Shareholders have a statutory right to remove a director.
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How does a public unlisted company differ from a listed company?
A public unlisted company has all the same powers as a public listed company. They can offer their shares to the public, however, they cannot offer its shares on the ASX. If the unlisted public company has less than $25M in assets and annual turnover, it is eligible to raise funds under the Crowd-Sourced Funding (CSF) regime. The company would be able to make offers of ordinary shares to investors of up to $5M in a 12-month period.
According to Treasury, there are approximately 7,000 unlisted public companies. The rationale to register a unlisted public company is to act for-profit, compared to a company that is limited by guarantee (i.e. does not have any share structure). An unlisted public company can use its share capital to provide financial returns to its shareholders.
An unlisted public company has limited liability. Shareholders limit their liability on the company’s insolvency to any unpaid price of their own purchased shares.
