Doing Business In Australia

Doing Business In Australia

Australia is open for business and welcomes foreign investors, overseas companies and expatriates returning to Australia.

Australia is an attractive market with great opportunity for overseas investment having weathered the global financial crisis extremely well. Australia has a stable economy and Government, with sound economic policies and Foreign investment in business is encouraged by our Government.

A foreign company looking to establish business operations in Australia may:

• register as a Foreign company in Australia;
• establish a fully owned Subsidiary company;
• acquire shares or assets of an existing Australian company.

The key considerations whether to register as a Foreign company or establish a new Subsidiary entity are whether:

• the company needs a local “on ground” presence in Australia;
• will the company need to employ staff in Australia; and
• protecting the parent company from liability or risk (which may depend on the nature of its business activities).

It is likely that a Foreign company would need to establish a new wholly owned subsidiary, if it intends to carry on business operations in Australia and have an on ground presence.

The new Subsidiary company may be a company limited by shares or a no liability company (for mining purposes). It is generally a company limited by shares, either as a proprietary (private) company or a public company.

Business people who are non residents can apply for a VISA to conduct short business visits and establish or manage a new or existing business or invest in Australia.

New Subsidiary Entity

The basic requirements to establish a new Subsidiary company registered with our corporate regulator Australian Securities & Investments Corporation (ASIC) are that:

• the company name is available;
• there is no infringement of any other trade marks or intellectual property rights of an existing company in Australia;
• the company must have at least one resident Director (but need not have a Secretary) where a sole director Company;
• where a public company it must have at least 3 Directors and at least 1 Secretary and 2 of the Directors and 1 Secretary must reside in Australia;
• there are no minimal capital requirements for an Australian subsidiary of a Foreign company and funds can be provided via shares and equity or by loan from the parent to the subsidiary entity;
• once registered the new company is issued an ACN (Australian company number).

Registration as a Foreign Company

Where the company does not require a physical presence in Australia, it may register as a Foreign company with ASIC. The foreign company will be given a Australian Registered Body Number (ARBN) with a certificate of registration.

The Foreign company must have a registered office in Australia, appoint a local Agent to represent the company and ensure its compliance with legislative requirements. A Foreign company is also required to lodge with ASIC, once every calendar year, a copy of its balance sheet, profit and loss and cash flow statements.

Merger & Acquisitions

If acquiring shares or assets of an existing Australian company, Government approval may be required under its foreign investment policy where the acquisition is of a “substantial interest” which is defined to be a business valued over AUD$231 million. This will therefore not impact on the majority of corporate or business investment.

Australian Regulators

There are three major corporate agencies that regulate companies in Australia:

• Australian Securities & Investments Commission (ASIC);
• The Australian Competition & Consumer Commission (ACCC); and
• The Australian Prudential Regulation Authority (APRA).

The Australian Tax Office (ATO) regulates our taxation laws nationally.

ASIC registers companies with a unique ABN or ARBN and records the companies name and address and its directors and shareholders.

The ACCC as the competition and consumer regulator, prohibits anticompetitive activities. The ACCC also prohibits a corporation from directly or indirectly acquiring shares or assets, if the acquisition would have the effect or be likely to have the effect of substantially lessening competition in the market. The majority of mergers do not raise these competition concerns but this should not be overlooked.

APRA as a regulator sets standards for the prudent management of Banks and other deposit takers (financial institutions), insurance companies, Friendly Societies and larger Superannuation Funds to ensure they are financially sound and meet their obligations to depositors and policy holders.

Australian Taxation Regime

An Australian resident company is currently subject to a tax rate of 30% of its taxable income. A non-resident company is taxed on its Australian source income at the same rate. A non-resident company can obtain relief or a reduction in Australian tax under relevant tax treaties.

There are of course, a number of other complex taxation issues such as obligations to register for GST, transfer pricing and capital gains tax issues to be considered.

Due Diligence and Feasibility Issues

Whether a Foreign company establishing business operations, or an individual looking to acquire a business in Australia we recommend that you:

• Conduct appropriate legal, financial and market research prior to establishing business operations.
• If buying an established business, ensure you have conducted appropriate legal and financial due diligence on the business.

Engage at the earliest opportunity your corporate and management team and your professional advisors, lawyers, accountants and financial advisors to identify risks and ensure your interests are protected. Using specialist legal advisors with industry knowledge, who are members of a recognised association will protect your interests.

Wisewould Mahony are Corporate, Franchise and Business Law Specialists with industry knowledge in a variety of specialised fields with a network of consultants to assist individuals and overseas companies to establish business in Australia.