required to obtain the approval of the FIRB prior to such acquisition occurring. Australian private companies must not have more than 50 shareholders (excluding any employee shareholders). Where this 50- shareholder limit is exceeded, the Corporations Act requires the company to convert to a public company. Director’s Duties Director’s duties in respect of Australian companies are largely set out in the Corporations Act, however there are some duties which derive from Australian common law. These duties include:

is over 18 years of age;

has not previously been disqualified from acting as a director (for example, because of acting as an officer of two or more companies that have gone into liquidation within the past 7 years); and ordinarily resides in Australia. Note the requirement for a director to “ordinarily reside” in Australia is not a question of citizenship, rather it is a question of where that person is usually domiciled.

Australian public companies must have at least three directors who satisfy the age and qualification requirements set out above, two of which must ordinarily reside in Australia. Public companies must also have at least one secretary who resides in Australia. Australian branches of foreign companies do not require a local director but must appoint at least one local agent. Directors of Australian companies are also required to obtain a Director Identification Number ( Director ID ) before their appointment. Local Shareholding Requirements There are no minimum start-up capital requirements for establishing a company in Australia. In fact, it is very common for many companies to start out as “$2 Companies”, being a company with only AUD $2 in issued share capital. Australian companies must have a minimum of one shareholder. There is no local shareholding requirement for establishing a private company in Australia, however it is worth noting that foreign persons or entities that wish to acquire shares in established Australian companies, or interests in Australian businesses, may be

Duty of care and diligence – Directors must act with a degree of care and diligence in performing their role as a director. The relevant level of care and diligence is measured against the expectation that a reasonable person would have of a person acting in the capacity of a company director. A director may not be liable for breach of their duty to exercise care and diligence, if it can be established that the director: a) made the relevant decision in good faith and for a proper purpose; b) reasonably believed the decision was in the best interests of the company, after having made all reasonable inquiries necessary to inform themselves about the subject matter of the decision; and c) made the relevant decision while having had no personal interest in the matter. Duty to act honestly in good faith – Directors must act in the best interests of the company as a whole and for a proper purpose. Broadly speaking, this

ILN Corporate Group – Establishing a Business Entity Series

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