Corporations Law Changes
July 1998 -- revised May 1999
The Company Law Review Act 1998 commenced on 1 July 1998. This Act introduces the most profound changes to company law since the commencement of the Corporations Law.
The main changes can be summarised as follows:
- The process of setting up a company has been simplified. A person will be able to set up a company by lodging a completed application form with the Australian Securities and Investments Commission (ASIC). Directors, secretaries and members listed with their consent in the application form will be automatically appointed upon the company's registration.
- The Memorandum of Association has been abolished, and companies no longer need to have Articles of Association. The basic rules of internal management which until now have been in a company's Articles are now placed in the Corporations Law as ‘replaceable rules’ – a company will be able to adopt a Constitution which displaces some or all of them. Existing companies will continue to have their Memorandum and Articles as their Constitution unless they choose to repeal them.
- The use of electronic technology to facilitate the holding of meetings is expressly permitted by the legislation. For directors’ meetings, any form of technology agreed to by the directors may be used. For members’ meetings, any form of technology that gives members a reasonable opportunity to participate in the meeting may be used.
- Members of a proprietary company may pass all forms of resolution (except for the removal of an auditor) by signing a circulating resolution. A meeting is not necessary provided that all members sign the resolution.
- Under the Company Law Review Act, shares will no longer have par value. This covers all shares, whether issued before or after the commencement of the new provisions. (This is also likely to have income tax consequences, especially in the restrictive effect on the ability to use a Share Premium Account for tax-effective bonus share issues or capital reductions.)
- Reductions of the share capital of a company will no longer require court confirmation. Instead, a capital reduction must be fair and reasonable to all shareholders, must not materially prejudice the company's ability to pay its creditors, and must be approved by the company's shareholders.
Under the new section 300A, the directors’ report for a listed company must include a discussion of broad policy for determining the nature and amount of payments to directors and senior executives, a discussion of the relationship between this policy and the company's performance, in addition to specific financial details of payments made to directors and each of the five highest paid company officers.
For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.
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