William Fettes, senior associate with DBA Lawyers, said the requirements in the Corporations Act 2001 (Cth) regarding registering new companies mandate that certain written consents and agreements must be in place for all proposed directors, secretaries and shareholders of a new company prior to the application for registration being lodged with ASIC.
Fettes said section 117 of the Corporations Act requires that for each proposed company member such as a shareholder, the person must consent in writing to become a member. Additionally, for each proposed company director and company secretary, the person must consent in writing to become either a director or secretary.
“Under s117(2)9(k), the CA states that for a company limited by shares, there must be a written agreement in place for each member regarding the number and class of shares, and the amount (if any) each member agrees in writing to pay for each share,” Fettes said.
“As well, there must be the same written agreement in place on whether the shares each member agrees in writing to take up will be fully paid on registration. If not fully paid, then the amount (if any) each member agrees in writing to be unpaid on each share. It must also state whether or not the shares each member agrees in writing to take up will be beneficially owned by the member on registration.”
He continued that under s117(5) of the act, the applicant must have the above consents and agreements when the application for registration is lodged. After the company has been registered the relevant consents and agreements must be given to the company to keep as part of the company’s records.
“It should be noted that there are also separate requirements for ‘signed consent’ that broadly apply to the appointment of officeholders for existing companies,” he added.
“In particular, ss201D and 204C of the CA require that a person must give their signed consent to the company prior to being appointed as a director or secretary and the company must keep this signed consent.”
Fettes said failure to comply with these consent requirements, including the associated company recordkeeping obligations, constitutes a strict liability criminal offence, and failures regarding consent being in place may render one or more purported appointments void, placing the company in a precarious position.
“For the purposes of new company registrations, s120 of the CA clearly establishes that consent requirements are integral to the validity of appointments of members, directors, and secretaries.”
“It states that ‘a person becomes a member, director or company secretary of a company on registration if the person is specified in the application with their consent as a proposed member, director or company secretary of the company’.”
He continued that any deficiencies in consent documentation are likely to introduce significant uncertainties about the status of officeholders and members which could seriously impede the company’s operations and transactions, leading to ongoing risks that require careful management.
“Although industry practice over the years has not always treated the consent requirements in the CA with sufficient care, advisers should not be complacent about these rules when ordering new companies,” he said.
“Advisers should be aware that ASIC has become more proactive in recent times about reviewing consent paperwork in connection with subsequent company filings such as correction requests made pursuant to ASIC’s Form 492 process.”
He said this kind of commonplace request may prompt ASIC to query whether the appropriate consents and agreements were in place before the company’s registration and then given to the company.
“Any advisers and individuals who have been involved with registering a new company without adequate consent paperwork in place may find themselves unprepared in relation to ASIC’s scrutiny and exposed to compliance action and other negative repercussions,” he said.
“Failure to comply with the requirements not only constitutes a strict liability offence but also jeopardises the status of officeholders and members/shareholders.”
