Week 1 Tutorial Questions
Distinguish between a proprietary company and a public company.
A public company is one in which there is usually a substantial public interest in that the ownership of the companys share capital is widely spread. Public companies are entitled to raise capital through a share issue by issuing a disclosure document which entitles them to have their shares or debentures etc. listed on a Stock Exchange to facilitate transferability.
Proprietary companies on the other hand have specific limitations in terms of the amount and restrictions on its fundraising activities.
Specific features of a proprietary company include the need to have a share capital (unlike a public company which may be limited by guarantee and not merely shares):
a requirement to have at least one shareholder and only one director (three directors for a public company) and not more than 50 shareholders (not including employee shareholders)
not required to restrict the transfer of its shares (however it may elect to do so)
the use of the designation “Pty” or “Proprietary” in its name
a requirement not to engage in any fundraising activity which would require it to lodge a disclosure document with ASIC.
What is the purpose of a certificate of registration?
A certificate of registration is issued by ASIC as a part of the registration procedure. Providing the company complies with S117 of the Corporations Act, ASIC will:
give the company an ACN Number
register the company
issue a certificate that states the companys name, ACN No. etc.
Once registered, the company is capable of performing all the functions of a corporate body.
What are replaceable rules and how do they differ from a constitution?
Replaceable rules are the set of internal rules (contained in the Corporations Act) governing the conduct of its operations between the company and its member directors and between members themselves [see example of such rules in ch 1].
If the rules are not adopted by the company then they must draw up a constitution which will cover much of the same issues covered by the replacement rules but may be extended or modified by the promoters of the company.