Tuesday, December 7, 2010

Reducing the risk of ASIC Rejecting your company registration order

As easy and streamlined as the Cleardocs’ process for registering companies online is, the convenience depends on ASIC’s ability to register your company application without any problems. Some of the issues which cause rejections can be prevented.  For example, as mentioned in previous blogs, the ASIC identical Names Check facility on the ASIC site is a good start to see what names you can and cannot choose for your company. (http://www.search.asic.gov.au/gns070.html).

There are a few other things to be aware of when answering the questions on the Company Registration interface. By better understanding them, you can increase the possibility of having ASIC accept your application. They are also further explained by clicking on the blue information icons found next to each question. 

Registered Business Names
The Cleardocs interface enables you to select an already Registered Business Name as your proposed company name — as long as there is a connection between the owners of the Business name and the Company. All you need to do is answer ‘Yes’ to the question ‘Is the proposed company name identical to an already Registered Business Name’. A list of states will appear with blank fields next to them, you then type in the entire Registered Business Name numbers (including any letters). When you lodge the company registration, ASIC will conduct a short manual review before it registers the company.

By the way, the company name you are applying for must be EXACTLY the same as the business name the directors or shareholders own.

Has the company name already been reserved with an ASIC 410?
Sometimes, before registering a company, a customer may reserve the company name they want to use. They do that with an ASIC 410 form. This form will ensure that the proposed company name is reserved for a maximum of two months — during which time no one else would be able to register a company with that name.

If a company name is reserved, ASIC will provide you with a reservation number so when you are answering the questions for the company registration, you type in that reservation number to help ensure that the your company registration application  will be registered.

It is important to keep track of who is responsible for submitting (that is, being the “applicant” for) the name reservation form. This is because if the individual completing the registration form is different to the applicant on the reservation form for the same company, then ASIC will be unable to register the company until the reservation has been withdrawn. You can withdraw the reservation by fax — but it causes a delay.
Read more here

Does the company need a Company Secretary?
Although you will be able to register a Pty. Ltd. Company without appointing a company secretary, you should be aware of certain implications of structuring your company this way. Specifically, if you are setting up a company with a sole director who is not also secretary, then that is likely to make things difficult when the company deals with banks. As Maddocks has written in our ClearLaw articles (click here), in section 127 of the Corporations Act (2001), it stipulates that a company with a sole director can execute documents in one or two ways:
  •   by the sole director in their capacity as director and in their capacity as secretary ; or
  •  by the sole director and by another person who is the company secretary — to enable the company to do that, you can appoint another person as the company secretary in the question "Will any non-directors be a secretary?"

What is an Ultimate Holding Company?
People sometimes struggle with the question about the ultimate holding company, you can rea d about that on the Cleardocs website  (read more about the role of ultimate holding companies here).

Shares held beneficially or on trust?
In the Cleardocs Company Registration interface, you will be asked if shares are to be held “on trust”.  If a person holds shares on trust, it means they are being held for the benefit of another person or entity, such as a family trust.  The ASIC form refers to shares being held “beneficially” — which (a bit confusingly) is really the opposite of “on trust”. That is,  if you hold shares “beneficially”, it means that you are holding them for your own benefit (not on trust for the benefit of another person or entity).

For more information, read our Frequently Asked Legal Questions (FALQ) for shares held on trust here

Smoother company registrations
Understanding key terms and questions such as the above:
  • should reduce the possibility of your application being rejected (if it is you can correct your answers and lodge again); and
  • therefore should reduce the time you need to spend on getting a company registered with ASIC.

If ever you are unsure of what a question may be asking or referring to on any of our interfaces, be sure to click on the information icon for a direct and helpful explanation.

Check out our ClearLaw News Bulletin ‘Overview of things to consider when registering an Australian Company’ by our team at Maddocks – click here

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