{"id":8023,"date":"2018-01-15T08:00:02","date_gmt":"2018-01-14T21:00:02","guid":{"rendered":"http:\/\/www.dbalawyers.com.au\/?p=8023"},"modified":"2018-08-15T13:27:08","modified_gmt":"2018-08-15T03:27:08","slug":"not-companies-created-equal","status":"publish","type":"post","link":"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/","title":{"rendered":"Not all companies are created equal"},"content":{"rendered":"<p><a href=\"mailto:dbutler@dbalawyers.com.au\">Daniel Butler<\/a>, Director, DBA Lawyers<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-medium wp-image-8024\" src=\"http:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple-203x300.jpg\" alt=\"\" width=\"203\" height=\"300\" srcset=\"https:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple-203x300.jpg 203w, https:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple.jpg 600w\" sizes=\"(max-width: 203px) 100vw, 203px\" \/>Small private companies frequently act as trustees for SMSFs or trusts, and sometimes in their own right. These companies are governed by their constitution (a set of internal rules). Standard constitutions for a private company are often outdated and contain many pitfalls for the unwary. On the other hand, the DBA Lawyers company is carefully drafted for the pace of the present day and to cater for small private companies that are typically controlled by a family.<\/p>\n<p>Numerous advantages of using a DBA Lawyers company are not found anywhere else. These advantages are present for all new companies incorporated through DBA Lawyers, even if the company is not an SMSF trustee. Existing companies without our constitution can also use our constitution upgrade service to obtain an up to date and strategic constitution. This is important for companies that have an old constitution (often called a memorandum and articles of association) or a poorly drafted one.<\/p>\n<h3>Advantages of the DBA Lawyers company<\/h3>\n<ul>\n<li><strong>Successor directors and value-added template <\/strong>\u2014 A director can appoint one or more successor directors to step in as directors on the incapacity or death of the director. A template successor director form is provided with every company. Few to no other companies allow for successor directors or provide template documents to implement them.<\/li>\n<li><strong>Executor or attorney under enduring power of attorney stands in a shareholder\u2019s shoes<\/strong> \u2014 A shareholder\u2019s legal personal representative (\u2018LPR\u2019) is fully empowered to exercise shareholder rights (such as voting on the appointment of a director). The general law requires LPRs to be empowered in this way, but many other constitutions do not fully empower an attorney to act on a shareholder\u2019s behalf.<\/li>\n<li><strong>Modern expansive provisions<\/strong> \u2014 The constitution does not suffer from outdated provisions such as requiring at least two directors at all times. Further, almost all constitutions require every director to sign a resolution. However, under the DBA Lawyers constitution, a simple majority of directors can pass a resolution without a formal meeting.<\/li>\n<li><strong>Expansive powers to execute documents<\/strong> \u2014 The constitution allows a sole director to execute documents, even when they are not also a secretary. Many other constitutions follow the stricter provisions in the corporations law where a sole director can only execute documents where that person is also the company secretary.<\/li>\n<li><strong>Fair voting for majority directors and shareholders<\/strong> \u2014 Almost every constitution will allow a small number of persons (often two) to form a quorum for a meeting of shareholders or directors. If one or more persons are unable to attend (even due to innocent things such as being caught in traffic), the small number of persons forming a quorum can pass shareholder or director decisions without the consent of the overall majority who may not be present. This is because decision making is typically structured to allow a majority of those present at the meeting to make decisions, instead of having regard to the overall directors or shareholders. The DBA Lawyers constitution addresses this uniquely by requiring an overall majority of all existing director\/shareholder votes, ignoring the number present at a given meeting.<\/li>\n<li><strong>Fair voting for directors acting for someone else<\/strong> \u2014 When more than one director acts in place of somebody who would have been a director, the directors in office only have the voting power of the one person who would have been a director. This is useful for succession planning (not just in the SMSF context) to ensure fairness. It can apply, for example, when say two attorneys (under an enduring power of attorney) are acting as directors for an SMSF member who has lost capacity. Many other constitutions do not deal with this fairness issue, resulting in the other directors being out voted or their votes being diluted.<\/li>\n<li><strong>Division 7A loan agreement<\/strong> \u2014 A Division 7A loan agreement template is included in case a debit loan arises and to ensure a written loan agreement can be documented. The template covers both shareholders and shareholders\u2019 associates. Many other companies with associated templates do not cover div 7A of the <em>Income Tax Assessment Act 1936 <\/em>(Cth) and those that do will not generally cover loans to associates.<\/li>\n<li><strong>Flexible special purpose company provision<\/strong> \u2014 DBA Lawyers is recognised as Australia\u2019s leading SMSF law firm. If a company wants to act as a special purpose SMSF trustee (or cease to act as a special purpose SMSF trustee), there is no need to incur costs to change the constitution. The DBA Lawyers constitution has a switching provision that applies when needed. When acting as a special purpose company, a reduced ASIC annual fee (approximately an 80% discount) applies.<\/li>\n<li><strong>Suitable for SMSF investment in 50\/50 unit trust or company<\/strong> \u2014 If the company structure is set up exactly as 50\u201350 controlled by two unrelated family groups, the constitution does not contain any of the dangerous casting votes or other provisions that can lead to an in-house asset for the SMSF(s) investing.<\/li>\n<li><strong>Compliant and backed by lawyers <\/strong>\u2014 The constitution complies with the latest laws and is supported by a dedicated team of lawyers.<\/li>\n<li><strong>Detailed memo<\/strong> \u2014 A detailed memo on the operation of a company and directors\u2019 duties and shareholders\u2019 rights is included. This document can assist parties to understand what they need to know when they have a company.<\/li>\n<li><strong>Flexibility in share classes<\/strong> \u2014 The constitution has the flexibility to issue various share classes. This can allow planning for differentiated voting, dividend and capital rights. Also, \u2018Guardian\u2019 shares, for example, allow a guardian to exercise control in the event of a dispute. The different shares are summarised below.<\/li>\n<\/ul>\n<table>\n<tbody>\n<tr>\n<td width=\"121\"><strong>\u00a0<\/strong><\/td>\n<td width=\"121\">Right to vote<\/td>\n<td width=\"121\">Right to dividends<\/td>\n<td width=\"121\">Right to repayment of share price on winding-up<\/td>\n<td width=\"121\">Right to distribution of surplus assets on winding-up<\/td>\n<\/tr>\n<tr>\n<td width=\"121\">SMSF <sup>1<\/sup><\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\"><\/td>\n<td width=\"121\"><\/td>\n<td width=\"121\"><\/td>\n<\/tr>\n<tr>\n<td width=\"121\">Ordinary<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<\/tr>\n<tr>\n<td width=\"121\">Limited<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\"><\/td>\n<\/tr>\n<tr>\n<td width=\"121\">Guardian <sup>2<\/sup><\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\"><\/td>\n<\/tr>\n<tr>\n<td width=\"121\">Capital Share<\/td>\n<td width=\"121\"><\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<\/tr>\n<tr>\n<td width=\"121\">AA shares \u2013 TT shares <sup>3<\/sup><\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<td width=\"121\">\u2713<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<ol>\n<li>Issuing SMSF shares reinforces the special requirements for qualifying as a special purpose SMSF company and assists in ensuring these are not inadvertently breached. However, SMSF shares are not strictly required for the company to qualify as a \u2018special purpose company\u2019 (the constitution itself contains appropriate provisions to ensure the company qualifies).<\/li>\n<li>Broadly, Guardian Shareholders must be present at meetings and must consent to any decision before it can be passed.<\/li>\n<li>AA to TT class shares each have the same rights as ordinary shares, but issuing separate classes can offer greater flexibility with different shareholders.<\/li>\n<\/ol>\n<h3>Conclusion<\/h3>\n<p>While a new company is sometimes viewed as a commodity, those who are switched on will seek out the above strategic features that give a company or constitution update a strong footing.<\/p>\n<p style=\"text-align: center;\">*\u00a0 *\u00a0 *<\/p>\n<p>This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.<\/p>\n<p>Note: DBA Lawyers hold SMSF CPD training at venues all around Australia and online. For more details or to register, visit <a href=\"http:\/\/www.dbanetwork.com.au\">www.dbanetwork.com.au<\/a> or call 03 9092 9400.<br \/>\n<div class=\"printfriendly pf-button  pf-alignleft\"><a href=\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/?pfstyle=wp\" rel=\"nofollow\"  title=\"Printer Friendly, PDF & Email\"><img decoding=\"async\" class=\"pf-button-img\" src=\"https:\/\/cdn.printfriendly.com\/buttons\/printfriendly-pdf-button.png\" alt=\"Print Friendly, PDF & Email\" style=\"width: 112px;height: 24px;\"  \/><\/a><\/div><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Daniel Butler, Director, DBA Lawyers Small private companies frequently act as trustees for SMSFs or trusts, and sometimes in their own right. These companies are governed by their constitution (a set of internal rules). Standard constitutions for a private company are often outdated and contain many pitfalls for the unwary. On the other hand, the [<a class=\"read-more\" href=\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/\">read more<\/a>]<\/p>\n","protected":false},"author":22,"featured_media":8024,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,29,33,34,35,37,38],"tags":[],"ppma_author":[138],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Not all companies are created equal | Leading SMSF Law Firm<\/title>\n<meta name=\"description\" content=\"Standard constitutions for a private company are often outdated and contain many pitfalls for the unwary.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Daniel Butler\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/\",\"url\":\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/\",\"name\":\"Not all companies are created equal | Leading SMSF Law Firm\",\"isPartOf\":{\"@id\":\"https:\/\/www.dbalawyers.com.au\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple.jpg\",\"datePublished\":\"2018-01-14T21:00:02+00:00\",\"dateModified\":\"2018-08-15T03:27:08+00:00\",\"author\":{\"@id\":\"https:\/\/www.dbalawyers.com.au\/#\/schema\/person\/51e17c75fbc6987d17bcc7c68f6879c3\"},\"description\":\"Standard constitutions for a private company are often outdated and contain many pitfalls for the unwary.\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.dbalawyers.com.au\/announcements\/not-companies-created-equal\/#primaryimage\",\"url\":\"https:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple.jpg\",\"contentUrl\":\"https:\/\/www.dbalawyers.com.au\/wp-content\/uploads\/2018\/01\/apple.jpg\",\"width\":600,\"height\":887},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.dbalawyers.com.au\/#website\",\"url\":\"https:\/\/www.dbalawyers.com.au\/\",\"name\":\"DBA Lawyers\",\"description\":\"Leading SMSF Law Firm\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.dbalawyers.com.au\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.dbalawyers.com.au\/#\/schema\/person\/51e17c75fbc6987d17bcc7c68f6879c3\",\"name\":\"Daniel Butler\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.dbalawyers.com.au\/#\/schema\/person\/image\/2169bc3da061d4bd5f02e1a67c0df79e\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/d78c2b0f9e09daf27cca87ab8a52fe85?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/d78c2b0f9e09daf27cca87ab8a52fe85?s=96&d=mm&r=g\",\"caption\":\"Daniel Butler\"},\"description\":\"Dan is recognised as one of Australia's leading SMSF lawyers complemented by his taxation and commercial expertise. 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He has worked predominantly in the fields of tax and superannuation over the past 36 years, is a qualified Chartered Tax Adviser, Chartered Accountant and has an MBA from the University of Melbourne. Dan is a regular seminar presenter on tax and SMSF topics and has published extensively in these areas. Dan regularly presents for the major professional bodies including the SMSF Association, The Tax Institute, Chartered Accountants Australia and New Zealand and DBA Network. Dan is a member of the ATO's Super &amp; Employment Change Committee, The Tax Institute's National Superannuation Committee, the Law Institute of Victoria's Tax Committee and is involved with a number of other tax and SMSF committees. Dan presents on the subject of Taxation of Superannuation at the University of Melbourne's Master of Laws\/Tax program. Dan is also a Specialist SMSF Advisor\u2122.","url":"https:\/\/www.dbalawyers.com.au\/author\/daniel\/"}]}},"authors":[{"term_id":138,"user_id":22,"is_guest":0,"slug":"daniel","display_name":"Daniel Butler","avatar_url":"https:\/\/secure.gravatar.com\/avatar\/d78c2b0f9e09daf27cca87ab8a52fe85?s=96&d=mm&r=g","first_name":"Daniel","last_name":"Butler","user_url":"","description":"Dan is recognised as one of Australia's leading SMSF lawyers complemented by his taxation and commercial expertise. He has worked predominantly in the fields of tax and superannuation over the past 36 years, is a qualified Chartered Tax Adviser, Chartered Accountant and has an MBA from the University of Melbourne.\r\nDan is a regular seminar presenter on tax and SMSF topics and has published extensively in these areas. Dan regularly presents for the major professional bodies including the SMSF Association, The Tax Institute, Chartered Accountants Australia and New Zealand and DBA Network.\r\nDan is a member of the ATO's Super &amp; Employment Change Committee, The Tax Institute's National Superannuation Committee, the Law Institute of Victoria's Tax Committee and is involved with a number of other tax and SMSF committees. Dan presents on the subject of Taxation of Superannuation at the University of Melbourne's Master of Laws\/Tax program. Dan is also a Specialist SMSF Advisor\u2122."}],"_links":{"self":[{"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/posts\/8023"}],"collection":[{"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/comments?post=8023"}],"version-history":[{"count":0,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/posts\/8023\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/media\/8024"}],"wp:attachment":[{"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/media?parent=8023"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/categories?post=8023"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/tags?post=8023"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.dbalawyers.com.au\/wp-json\/wp\/v2\/ppma_author?post=8023"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}