The Corporations Act 2001 (Cth) (CA) contains a number of important requirements in relation to registering new companies with the Australian Securities and Investments Commission (ASIC). These requirements mandate, among other things, 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.
The required consents
Broadly, s 117 of the CA requires that:
- for each proposed company member (ie, shareholder) — the person must consent in writing to become a member (see s 117(2)(c) of the CA);
- for each proposed company director — the person must consent in writing to become a director (see s 117(2)(d) of the CA); and
- for each proposed company secretary — the person must consent in writing to become a secretary (see s 117(2)(e) of the CA).
Additionally, for a company limited by shares, there must be a written agreement in place regarding the following shareholding details for each member (see s 117(2)(k) of the CA):
- the number and class of shares;
- the amount (if any) each member agrees in writing to pay for each share;
- 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; and
- whether or not the shares each member agrees in writing to take up will be beneficially owned by the member on registration.
Under s 117(5) of the CA, the applicant must have the above consents and agreements when the application for registration is lodged. Moreover, 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.
NB: There are also separate requirements for ‘signed consent’ that broadly apply to the appointment of officeholders for existing companies. In particular, ss 201D 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.
Consequences for failing to obtain relevant consents
It is important to emphasise that failure to comply with the abovementioned consent requirements, including the associated company recordkeeping obligations, constitutes a strict liability criminal offence.
Furthermore, failures regarding consent being in place may render one or more purported appointments void, thereby placing the company in a precarious position.
For the purposes of new company registrations, s 120 of the CA clearly establishes that consent requirements are integral to the validity of appointments of members, directors, and secretaries:
(1) 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.
[Emphasis added]
Consequently, deficiencies in consent documentation are likely to introduce significant uncertainties about the status of officeholders and members. Naturally, this could seriously impede the company’s operations and transactions, leading to ongoing risks that require careful management.
ASIC’s administrative practice
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.
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. In particular, we note that this kind of commonplace request may prompt ASIC to query whether the appropriate consents and agreements were in place prior to the company’s registration and then given to the company. Thus, 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.
DBA Lawyers’ approach to compliance
DBA Lawyers has long recognised the significance of the consent requirements under the CA. We also actively seek to educate our clients and other stakeholders to ensure compliance.
Consent paperwork is a key part of our systems and processes for new company registrations. For instance, we provide the necessary consent forms for officeholders and shareholders as part of the online ordering process for new companies. These forms also cover all shareholding details required under s 117(2)(k) of the CA. This helps ensure that clients and users can be compliant with the CA consent requirements upon signature of the relevant consent forms prior to registration.
This proactive approach enables advisers and individuals to fulfill their legal obligations efficiently and effectively.
Conclusions
The consent requirements in the CA should not be overlooked when registering a new company with ASIC. These requirements, encompassing written consents for directors, secretaries, and shareholders, are fundamental to compliance and ensuring the validity of company appointments. Failure to comply not only constitutes a strict liability offence but also jeopardises the status of officeholders and members/shareholders.
With ASIC increasing its regulatory scrutiny in this area, it is imperative for advisers and individuals involved in company registrations to comply with the consent requirements. This not only mitigates legal risks but also ensures smooth operational continuity for newly established companies.
DBA Lawyers is committed to helping ensure clients are empowered to comply with the regulatory requirements by embedding streamlined processes for capturing the required consents as part of all new company orders.
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By William Fettes ([email protected]), Senior Associate, and Nick Walker ([email protected]), Lawyer, DBA Lawyers
Note: DBA Lawyers presents regular SMSF Online Updates. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.
For more information regarding how DBA Lawyers can assist in your SMSF practice, visit
This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.
17 July 2024
