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1、Chapter 1 Nature and regulation of companies Prepared by Mark Vallely,Learning objectives,Summarise the nature and attributes of a company (p. 2) Discuss the different types of companies which may be formed under the Corporations Act 2001 (p. 3) Describe the necessary documentation for forming a com
2、pany (p. 7) Describe the types of records needed to manage a company (p. 9) Compare and contrast shares and debentures, and discuss the reasons for issuing disclosure documents (p. 9) Discuss the background and purpose of the Corporations Act 2001 by which companies are formed, administered and diss
3、olved (p. 12) Evaluate the reasons for the development of accounting standards and describe the current arrangements for establishing accounting standards in Australia, subject to global influences in the standard-setting process (p. 14) Discuss the roles played by the Australian Securities and Inve
4、stments Commission (ASIC) and the Australian Securities Exchange Limited (ASX) (p. 25) Analyse the concepts of general purpose financial reporting and the reporting entity (p. 26) Describe the current differential reporting requirements (p. 28).,Nature of a company,A company is a legal entity Incorp
5、orated via registration by Australian Securities and Investments Commission (ASIC) Subject to requirements of Corporations Act 2001 A company has: the advantage of limited liability (Note1) separate legal existence from its members the legal powers of a natural person financing advantages the right
6、to own assets and enter contracts the right to sue and be sued,2 million companies in Australia (ASIC 2012),Proprietary companies,Most common type of company “Proprietary company” (Note1) Limited by Shares (Pty Ltd) Unlimited with a share capital (Pty) Proprietary companies Must have a share capital
7、 (limited by shares or unlimited) Minimum of 1 member, maximum of 50 Minimum of 1 director Cannot raise funds from the public Classified as large or small (see next slide for further discussion),Large / small test,Proprietary companies classify as large or small for reporting purposes Small propriet
8、ary companies must satisfy at least two of the following criteria: Annual gross operating revenue: $25 million Gross assets: $12.5 million Number of employees: 50 Entities that do not satisfy the criteria for classification as a small proprietary company are classified as large (Note 1),Public compa
9、nies,A public company is one that is not a proprietary company (Note 1) Limited by Shares Unlimited with a share capital Limited by guarantee No Liability (see next slide) A public company: Can invite public to subscribe for securities Can list on Australian Securities Exchange (ASX) Minimum 1 membe
10、r, no maximum Minimum of 3 directors Must prepare / publish audited financial statements (Note 2),Other titles for companies,Listed corporations Public companies listed on the ASX Disclosing entities An entity with enhanced disclosure (ED) securities (Note 1) Foreign companies Incorporated outside o
11、f Australia or in an external territory of Australia No-liability companies XYZ NL Sole object of the company must be mining Shareholders are not liable for calls on shares or debts of the company,Forming a company,To register a company, a person lodges the prescribed application form with ASIC On a
12、cceptance of the application ASIC will: Allocate an ACN (Australian Company Number) Register the company Issue a certificate of registration A company legally comes into existence on the date recorded on this certificate,Forming a company,Management of the company is governed either by replaceable r
13、ules or constitution Replaceable rules “Pro-forma” rules contained within Corporations Act Rules deal with (Note 1 ) Constitution Necessary if a company wants rules different to the pro-forma rules in the replaceable rules Public company must lodge constitution with ASIC,Administration of a company,
14、Directors manage on behalf of the members Certain registers and records must be maintained Minute books records actions/decisions in meetings Financial records to enable statements to be audited Registers of members (Share register) Register of option holders Register of debenture holders Required t
15、o be kept at the companys registered office,Funding a company,A public company can raise funds by issuing securities: Shares (equity) Debentures (debt) Options (equity) Shares represent ownership and can be issued to the public or privately placed with new investors or current shareholders Debenture
16、s represent a claim on the assets of the company and may be secured by a fixed or floating charge of the companys assets,Funding disclosure documents,Most public issues of shares, debentures or options require a disclosure document to be issued: Written notice inviting subscription Content regulated by Corporations Act Contains issue price, terms and conditions Copy of the disclosure document must be lodged with ASIC A prospectus is an example of a disclosure document,Backgroun
