Lyla Lindsey
The Australian federal government, also referred to as the Commonwealth government, operates under a representative democracy where citizens over the age of 18 are required to vote in elections. The national government is granted certain powers by the Australian Constitution, with some powers shared with the six states and two self-governing territories, and others remaining exclusively with the states and territories. The Australian Constitution defines constitutional corporations as 'foreign corporations, and trading or financial corporations formed within the Commonwealth'. The Corporations Act 2001 outlines the requirements for companies, registered schemes, and disclosing entities, while the Public Governance, Performance and Accountability Act 2013 defines corporate Commonwealth entities and Commonwealth companies. Despite claims on social media that the Australian government is a privately owned US company, this has been dismissed as a conspiracy theory, with the Australian government clarifying that its registration with the US Securities and Exchange Commission is a routine process for selling bonds and other financial instruments.
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What You'll Learn
The Australian Constitution defines constitutional corporations
The Australian Constitution, established in 1901, defines constitutional corporations as 'foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth'. This means that any foreign corporation, regardless of whether it is involved in trading or financial activities, can be classified as a constitutional corporation.
Constitutional corporations encompass publicly listed companies in Australia, as well as private companies, incorporated joint ventures, and corporate trustees. To determine if an entity qualifies as a trading or financial corporation, it must first be established if it is incorporated. Subsequently, the 'activities test' is applied, which evaluates whether the entity engages in trading and/or financial activities, and whether these activities are substantial rather than peripheral. An entity that generates significant income from trading or financial activities is likely to be considered a trading and/or financial corporation.
Foreign entities, or CCEs, are formed outside of Australia but carry out business operations within the country. The classification of a foreign entity as a CCE depends on various factors, including whether it has a physical presence in Australia or provides goods or services to individuals located in the country. If a foreign entity is required to report its income to the Australian Taxation Office, it is likely considered to be conducting business in Australia.
In the context of Australian federalism, the Commonwealth refers to the national government, which shares powers with the six states and two self-governing territories. The Australian Constitution, modelled on the British (Westminster) tradition, establishes a federal system of government with power distributed between the Commonwealth and the states.
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Foreign corporations and registration
Foreign companies or corporations that wish to operate in Australia must register as foreign companies. Foreign companies are defined as entities formed outside of Australia that carry on an enterprise in Australia. Whether a foreign entity is carrying on an enterprise in Australia depends on each particular case. However, relevant considerations include whether the entity has a physical presence in Australia or provides goods or services to persons located in Australia.
To register a foreign company, Form 402 ('Application for registration as a foreign company') must be completed and signed by a director or secretary of the proposed foreign company, or the proposed foreign company’s local agent. The form must be lodged with the applicable fee and general information about the proposed company and how it will be run. If any supporting documents are not in English, a reasonable translation must be provided.
Once the application has been processed and approved, the company will receive a registration certificate and an Australian Registered Body Number (ARBN). Registered foreign companies have ongoing obligations, including reporting responsibilities to the Australian Securities and Investments Commission.
It is important to note that foreign companies cannot use names that are identical to existing company or business names in Australia. Additionally, certain words and phrases cannot be used without the approval of an Australian government minister. These include words that could mislead people about the entity’s activities, such as suggesting a connection with the Australian Government or the British Royal Family when none exists.
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Trading and financial corporations
The Australian Constitution defines constitutional corporations as "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth". These constitutional corporations can include publicly listed companies in Australia, as well as private companies, incorporated joint ventures, corporate trustees, and more.
To determine whether an entity is a trading and/or financial corporation, it must first consider whether it is incorporated. Following this, an 'activities test' must be applied, which considers:
- Whether the entity is engaged in trading and/or financial activities.
- Whether these activities are substantial and not merely peripheral to the entity.
An incorporated entity that engages in trading or financial activities and generates significant income is likely to be considered a trading and/or financial corporation. Foreign entities are formed outside of Australia but carry on an enterprise in Australia. Whether a foreign entity is carrying on an enterprise in Australia depends on each case, with relevant considerations being whether the entity has a physical presence in Australia or provides goods or services to persons located in Australia.
The Corporations Act 2001 outlines various regulations regarding corporations in Australia, including provisions for public company auditors, exemption orders, and the administration of a company's affairs.
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Corporate trustees and controlling corporations
A corporate trustee, also known as a director, is a company that runs a trust as a distinct legal entity. Corporate trustees are protected by limited liability, meaning that directors cannot be held personally liable for external legal issues involving the trust. They are also easily replaceable due to the trust being distinctly separate from its trustees.
A corporate trustee can be a member of a controlling corporation's group, as long as it is a body corporate and not a subsidiary of any other Australian body corporate. A trust, on the other hand, cannot be a controlling corporation as it does not meet the criteria of being a body corporate.
The Australian Constitution defines constitutional corporations as 'foreign corporations, and trading or financial corporations formed within the Commonwealth'. Foreign corporations are those formed outside of Australia but carry on an enterprise in Australia. Whether a foreign entity is carrying on an enterprise in Australia depends on its physical presence in the country or if it provides goods or services to persons located in Australia.
The role of a controlling trustee is outlined in the Bankruptcy Act 1966. A controlling trustee is responsible for ensuring that creditors are aware of their rights against the debtor, which may be extinguished upon the execution of a PIA. They must also take appropriate steps to identify the assets of the debtor, including making inquiries with third parties such as solicitors, accountants, and financial institutions.
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Corporations Act 2001
The Corporations Act 2001 is a complex piece of legislation that governs the creation and operation of corporations in Australia. It is published in five volumes, covering ten chapters, with multiple parts and divisions within each chapter. The Act defines the requirements and procedures for incorporating a company, the rights and obligations of corporations and their directors, and the regulations surrounding financial activities and reporting.
One of the key features of the Act is its definition of "constitutional corporations," which includes both foreign corporations and trading or financial corporations formed within Australia. Foreign corporations are those formed outside of Australia but carrying on an enterprise within the country. Determining whether a foreign entity is carrying on an enterprise in Australia depends on factors such as physical presence or the provision of goods and services to persons located in Australia.
The Act also outlines the role of the Australian Securities and Investments Commission (ASIC) in regulating corporations. ASIC has powers to make declarations and class orders, as well as enforce disclosure requirements for listed companies and schemes.
Additionally, the Act covers specific scenarios, such as the administration of a company's affairs, the rights of secured parties, and the issuance of shares. It also provides defences against prosecutions and outlines liabilities for proposing or withdrawing bids.
The Corporations Act 2001 is subject to a cooperative scheme between the states and the Commonwealth, where any changes to the Act must be referred to the Ministerial Council for Corporations (MINCO) for approval. This arrangement has faced pressure due to the Commonwealth Government's increasing reliance on the corporations power to push through its industrial relations reform agenda, leading to tensions with some Labor states.
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Frequently asked questions
A constitutional corporation is defined by the Australian Constitution as a foreign corporation, or a trading or financial corporation formed within the Commonwealth.
A foreign corporation does not need to be formed within the Commonwealth to be classified as a constitutional corporation. Foreign corporations are formed outside of Australia but carry on an enterprise in Australia.
The Australian federal government, also referred to as the Commonwealth government, has the power to create corporations through the Corporations Act 2001.
The Corporations Act 2001 is a piece of legislation that governs corporations in Australia. It covers various aspects of corporate structure and operation, including the appointment of auditors, voting rights, and the issuance of shares.
The Australian Securities and Investments Commission (ASIC) is the regulatory body that oversees corporations in Australia. They have the power to make declarations and class orders, as well as modify certain sections of the Corporations Act.
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