It’s advisable for everyone to have a will. If you’re a sole director and sole shareholder of a company, according to ASIC, you should have a will. It’s recommended that within the will you make provision for who is the beneficiary or beneficiaries of your shares if the sole director/shareholder dies.
If you are a sole director and sole shareholder of a company and do not have a will outlining what happens in the event of your death, it’s possible that a close relative or other such person would have to apply to the Supreme Court for letters of administration to manage the estate and this could take some time - possibly weeks, if not months.
Alternatively, in the absence of any immediate relatives or other obvious people to deal with the estate, a Public Trustee may step in and administer the deceased estate, but this process can also take months. During that period when there is no director, the company may be unable to operate and with no-one properly authorised to make management decisions or act for the company, it may be unable to trade.
Banks and other financial institutions in particular may be unwilling to accept instructions in relation to a company’s trading account if they are not satisfied there is someone properly authorised to act for it. This may result in staff and suppliers unable to be paid, which can quickly have a harmful effect on the reputation and value of the company.
What happens if the Director of a Company dies depends on the number of Company Directors and if a will has been made or not. For companies with more than one Director, the surviving Directors can continue to manage the Company without much issue and notifying ASIC is a fairly straight forward process. ASIC can be notified of the death of the Director using a Form 484. A Form 484 is used to notify ASIC of the details of any changes made to a Company. If a new Director is being appointed, this change can be made using the same Form 484. Patricia Holdings can lodge this Form on your behalf and prepare the necessary resolutions for $100+gst.
For Sole Director Companies however, the process is a bit more complicated – especially where the Sole Director is also the Sole Shareholder.
For those that have organised a will, section 201F of the Corporations Act 2001 provides that in the event of the death of a single Member/Director a Pty Ltd company, the executor or other personal representative appointed to administer the deceased’s estate may appoint a new Director to the company. This section also provides that this newly appointed Director has all the powers, rights and duties of the deceased Director and can keep the Company running until shares are transferred out to beneficiaries who may then appoint new Directors if they wish.
Once an executor or administrator has been appointed, ASIC should be notified via a Form 484. ASIC would also need to be notified if/when a replacement Director is appointed.
If the Sole Director of a Company dies without leaving a will, the death will usually leave the Company without any person properly authorised to immediately manage the Company.
A company can reduce its share capital in a number of ways under the Corporations Act 2001 – The two most common methods are:
- A share capital reduction; or
- A share buy-back.
The Corporations Act limits a company’s ability to reduce its share capital prior to the company being wound up. The main reason for this is to protect the interests of creditors who are faced with the principle of limited liability should the company become insolvent, but also acts to protect the interests of and ensure fairness between shareholders.
A share buy-back differs from a share capital reduction in that shareholders are not obliged to accept the company’s offer for a share buy-back. By contrast a share capital reduction can affect shareholders who voted against the decision.
A SHARE CAPITAL REDUCTION involves returning the money (although not always) that was originally paid by a shareholder to acquire shares, to that shareholder, while cancelling those shares.
Section256B of the Corporations Act 2001 states that a company may only reduce its share capital if the reduction:
- is fair and reasonable to the company's shareholders as a whole; and
- does not materially prejudice the company's ability to pay its creditors (although this is not relevant if the shares are cancelled for no consideration); and
- is approved by shareholders under section 256C.
A share capital reduction can be either:
- An equal reduction which may be passed by a simple majority, unless stated otherwise in the company’s constitution. This type of share capital reduction is one
- which relates only to ordinary shares;
- applies to each holder of ordinary shares in proportion to the number of ordinary shares they hold; and
- the terms of reduction are the same for each holder of ordinary shares; or
- A selective reduction which must be approved by either;
- a special resolution with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; or
- a resolution agreed to by all ordinary members.
Further, if the reduction involves the cancellation of shares, the reduction must also be approved by a special resolution passed at a separate meeting of the members whose shares are to be cancelled.
This type of share capital reduction is one which relates to any other reduction where the criteria for an equal reduction are not met.
In either case, a Form 2560 Notification of reduction in share capital details must be lodged with ASIC along with notice of the meeting at which it is proposed to pass the resolution to reduce the share capital and any document relating to the reduction that will accompany the notice of the meeting sent to members. Notice must be no less than 29 days before the meeting for Public companies and 22 days for any other company. A single member is not required to give notice of a meeting, however will still be required to lodge a Form 2205 once the resolution is passed.
Once the decision has been made to reduce share capital, a Form 484 Change to company details must then be lodged with ASIC notifying them of the changes.
A SHARE BUY-BACK involves a company offering to purchase some or all of the shares of a shareholder. There are a number of different categories of share buy-back, the most common of which for non-listed companies are equal access and selective.
Section 257A states that a company may buy back its own shares if:
- the buy-back does not materially prejudice the company's ability to pay its creditors; and
- the company follows the procedures laid down in this Division – being Division 2 of Part 2J.1 of the Corporations Act.
An all access buy back is the simplest form of buy back and involves all ordinary shareholders receiving an identical offer to sell the same percentage of their shareholding back to the company. Different rules also apply between share buy-backs involving 10% or less of the total shares to be purchased within a twelve-month period, and share buy-backs involving over 10% (the 10/12 limit).
If the buyback is within the 10/12 limit then shareholder approval is not required, however, if a proposed share buy-back is over the 10/12 limit then it can only take place following passage of an ordinary resolution. Once these requirements have been complied with, and the share buy-back has been carried out, the company will need to notify ASIC of the change in share structure by lodging a Form 484.
A selective buyback occurs where identical offers are not made to every shareholder, for example where offers are only made to some members of the company. This type of buyback must either be:
- approved by all shareholders, or
- by a special resolution (requiring a 75% majority) of the members in which no vote is cast by selling shareholders or their associates. Selling shareholders may not vote in favour of a special resolution to approve a selective buy-back.
The 10/12 limit does not apply to this type of buy-back.
Where shareholder approval for a buy-back is required, a Form 280 Notification of share buy-back details must be lodged with ASIC before the notice of meeting and associated documentation is sent to shareholders. If the company wants to enter into the buy-back agreement within 14 days of lodging the Form 280, than it will also have to lodge a Form 281 Notice of intention to carry out a share buy-back.
Once these requirements have been complied with, and the share buy-back has been carried out, the company will need to notify ASIC of the change in share structure by lodging a Form 484.
Subject to the governing documents, a company may convert shares from one class of shares to another. Section 246F(1)(b) of the Corporations Act 2001 states that a company must lodge notice in the prescribed form following “a conversion of shares in a class of shares in the company into shares in another class.”
In order to notify ASIC of this change, a Form 211 Notification of division or conversion of classes of shares will need to be lodged. In order to avoid late fees, this form will need to be lodged within 14 days of the date of the conversion and cannot be lodged online.
Yes, a company can amend, replace or repeal an existing constitution. Generally this is achieved by passing a special resolution; however an alternative process may be set out in the company’s original constitution.
A special resolution is passed where at least 75% of voting members vote in favour of the resolution at a general meeting. In order to hold a general meeting and vote on a special resolution, a company must give sufficient notice.
At least 28 days’ notice for publicly listed companies and 21 days’ notice for other company types must be given unless members with at least 95% of the votes that may be cast at the meeting agree beforehand to vote on shorter notice pursuant to s249H(2) of the Corporations Act 2001.
If the company amending or replacing its constitution is a public company then, pursuant to s136 of the Corporations Act 2001, it will also need to lodge with ASIC:
- A Form 205J which notifies them that a resolution to change the company’s constitution has been passed; and
- A copy of the new constitution that has been adopted; or
- A copy of the modification that has been made to the constitution.
A shareholder of a company is able to sell their shares to another party. The process that needs to be followed in order to transfer shares will depend on the company’s constitution (or replaceable rules) and the terms of any shareholders agreement that may be in place. This will generally involve offering the shares to existing shareholders before offering them to third parties.
Once the seller has found a buyer using the procedures set out in the company’s governing documents, the buyer will need to consent to becoming a member of the company and being bound by the rules of the constitution. Then, once a formal agreement has been entered into, ASIC will need to be notified of the changes to the shareholder details.
In order to notify ASIC of the share transfer, the company will need to lodge a Form 484 – changes to company details which will contain:
- The name and address of the seller;
- The name and address of the purchaser;
- The class of shares being transferred;
- The amount being paid per share; and
- Whether the shares will be beneficially held.
Patricia Holdings can assist with preparation and lodgement of the Form 484 as well as the relevant minutes/resolutions. Simply place your order for ‘Standard ASIC Company Changes’ as part of our company secretarial service. This form should be lodged within 28 days of the changes taking effect to avoid late fees.
A company can issue new shares to a new or existing shareholder after the company has been registered. Section 254X in the Corporations Act 2001 (Cth) states that a company must notify ASIC of a share issue within 28 days in the prescribed form which sets out:
- The number of shares that were issued;
- The class to which each share belongs;
- The amount agreed to be paid;
- The amount unpaid (if any) on each of those shares; and
- If the shares are issued for non-cash consideration under a contract, the company must also lodge a Form 207Z - Certification of compliance with stamp duty law which certifies that all state and territory stamp duty associated with the contract has been paid. Additionally, if the company is a public company, either a Form 208 or a copy of the written contact must be lodged.
In order to notify ASIC of a share issue, a company will need to lodge a Form 484 – changes to company details which will contain all of the required information above (excluding the additional forms). Patricia Holdings can assist with preparation and lodgement of the Form 484 as well as the relevant minutes/resolutions. Simply place your order for ‘Standard ASIC Company Changes’ as part of our company secretarial service. This Form should be lodged within 28 days of the changes taking effect to avoid late fees.
Most documents or Forms need to be lodged with ASIC within a certain timeframe which can vary depending on the type of Form (usually 14 or 28 days). If a document is lodged outside of the required timeframe then late fees can apply.
Late fees as at 1 July 2020 are:
- one month $82
- over one month $340
Notifying ASIC of changes to the details of a company, such as the removal of a director, is done using a Form 484 ‘Changes to Company Details’ which is lodged online. The exact procedure that must be followed where a director is resigning from a proprietary company will depend on its governing documents (constitution or replaceable rules).
Before lodging the Form to remove a director, you should ensure that the minimum officeholder requirements for that particular company type will continue to be met. A proprietary company must have at least one director who resides in Australia, and a public company must have at least 3 directors with at least two residing in Australia.
Patricia Holdings provide you with the required minutes or resolution, notification of resignation as well as the preparation and lodgement of the Form 484 with ASIC, leaving you with nothing more to do. Simply place your order for ‘Standard ASIC Company Changes’ as part of our company secretarial service.
Notifying ASIC of changes to the details of a company, such as the appointment of a director, is done using a Form 484 ‘Changes to Company Details’, which is lodged online. The exact procedure that a company must follow to appoint or resign a director will depend on their governing documents (constitution or replaceable rules).
Before lodging the Form to add a director, they must provide written consent to taking on the roles and responsibilities of being a director. They must be 18 years of age and not have otherwise been disqualified from being a director.
A director must provide ASIC with their:
- Full legal name (and any former names);
- Residential address;
- Date of birth; and
- Place of birth.
Patricia Holdings provide you with the required minutes or resolution and consent to act as the preparation and lodgement of the Form 484 with ASIC, leaving you with nothing more to do. Simply place your order for ‘Standard ASIC Company Changes’ as part of our company secretarial service.
A proprietary limited company can convert to a public company by passing a special resolution of the shareholders so long as the conversion between the two company types are allowed under section 162 of the Corporations Act 2001. Section 162 states that:
A proprietary company limited by shares may convert to:
- An unlimited proprietary company;
- An unlimited public company; or
- A public company limited by shares.
An unlimited proprietary company may convert to:
- Proprietary company limited by shares
- Public company limited by shares
- Unlimited public company
In order to complete the conversion a special resolution must be passed; the appropriate Forms and documents must be lodged with ASIC and the relevant fee must be paid. The documents to be lodged are:
- A Form 205 - Notification of resolution;
- A Form 206 Application for change of company type; and
- A copy of the new company constitution.