Resources.

28/07/2016 | Stephen Harvey company, risk

What State is Your Company In?

Dealing with a Constitutional Hangover
Share

You’ll notice that when applying to register a company, you must nominate a State or Territory in which it will be taken to be registered. The choice may have many implications, not least of which could be the applicability of that State’s laws to the company (e.g. duty laws).

At this point, you might be asking: isn’t the registration and operation of companies regulated by the Corporation Act, a Commonwealth law which does not distinguish between States (on most things)? And, yes, that’s true. This seems, however, to be a bit of a constitutional hangover from the days when each State and Territory had its own companies legislation. 

What State Should I Specify?

The same is true for a company registration as establishing a trust and nominating the State laws under which it will operate. The decision on the State to specify it is entirely up to you.

Some considerations to take into account are:

  • There is no right or wrong answer, and the Corporations Act does not provide any guidance on the question;
  • Consider if the chosen State or Territory imposes duty on the transfer or allotment of shares. For example, they might impose duty on dealings in shares in companies that are taken to be registered in that State or Territory;
  • The Corporations Act does provide that the legal capacity and the powers of the company are not dependent on the State or Territory in which it is taken to be registered, meaning the choice should not adversely affect the validity of the company’s actions;
  • It is not unusual for a particular company to be registered in the State or Territory in which its registered office or primary business operations are located. The connection, however, could just as easily be the State or Territory in which the major shareholder or a director resides; and
  • A company is not taken to have accepted the laws of a chosen State or Territory as the laws by which it will be governed, nor will it be taken to have submitted to the jurisdiction of the courts of that State or Territory. Usually, the jurisdiction applied will depend on the subject matter of any court proceedings.

Please call us on 1800 773 477 or email if you would like further insight or assistance in the choice of state for your company registrations.