STRUCTURING AUSTRALIAN INVESTMENTS

Entrants to Australia should seek advice and carefully consider their objectives before choosing an investment structure. Each has its own distinct advantages, challenges and tax implications.  Ultimately the most appropriate structure will depend on your businesses’ objectives.

We summarise the most common structures used by foreign companies to enter the Australian market below.  Please note that this information is general in nature.  Specialist legal advice should be obtained before progressing any of these options.

 

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INCORPORATING A NEW AUSTRALIAN COMPANY

The most popular way to enter the Australian market is to incorporate a new Australian company. An Australian company can be wholly owned by a foreign entity.

While there are many types of companies, a proprietary company (also known as a private company) is the most common vehicle used by foreign entrants. Some of the key characteristics of a proprietary company include:

  • The liability of shareholders is limited to the amount of their investment in the company;
  • A legal identity separate to that of its members and directors;
  • The requirement to have an Australian resident director. Additional directors may be foreign residents;
  • The requirement to appoint a public officer responsible for the company’s tax obligations. This person must ordinarily reside in Australia and understand the nature of their appointment;
  • A registered office located in Australia;
  • A maximum limit of 50 non-employee shareholders; and
  • A general prohibition on raising funds from the public.

Register as a foreign company, image of paper and pencil

REGISTERING AS A FOREIGN COMPANY IN AUSTRALIA

If you wish to conduct business in Australia as a foreign company, you must register with Australia’s corporate regulator – the Australian Securities and Investment Commission (ASIC) – and hold an Australian Registered Body Number (ARBN).

At a minimum, the registration process will involve:

  • Registering a business name;
  • Submitting an application with accompanying documents (including a certified copy of your Constitution) to ASIC;
  • Selecting an Australian registered office; and
  • Appointing a local agent who must reside in Australia and will be responsible for the foreign company complying with the Corporations Act 2001 (Cth).
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Enter into a joint venture, image of mechanical joint

JOINT VENTURE

 

 

Entrants to the Australian market may also consider a joint venture with an existing Australian entity.

A joint venture can be unincorporated (and governed by contracts) or incorporated through a company owned by each of the joint venturers in their respective proportions. Either way, an agreement will be required to document the key terms, which usually includes:

  • The object of the joint venture;
  • The role and obligations of each party;
  • Decision making processes;
  • The management team;
  • The financial contribution each party is required to make;
  • How profits will be split;
  • Rights to information, including financial accounts;
  • Ability for each party to terminate; and
  • Dispute resolution procedures.

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ACQUIRING AN EXISTING AUSTRALIAN ENTITY

 

 

Depending on your objectives, overseas entrants may decide to enter the Australian market by acquiring an existing business. Businesses may favour this approach where they can use an existing businesses’ infrastructure, employees and client base.

As with any acquisition, a key consideration will be whether you wish to take control of an existing company by purchasing shares representing a majority stake or whether you only want to purchase a select group of assets. There are advantages and disadvantages associated with each approach. The decision is often based on findings from due diligence investigations such as, taxation implications, government licences or authorities (which may be difficult to transfer in the case of an asset sale) and the extent of liabilities within the target company (which purchasers may not wish to take on by purchasing shares).

Foreign companies wishing to acquire an existing business may also require government approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth). As a general rule foreign companies acquiring 20% or more of an Australian business valued more than $252 million will require prior approval. Higher thresholds apply to investors from certain countries (as a result of free trade agreements), and there are different thresholds and rules relating to foreign government investors and investment in land rich companies, agribusiness and ‘sensitive sectors’, such as telecommunications, transport, defence and media.

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RAISING MONEY FROM AUSTRALIAN INVESTORS

 

 

Companies raising money in Australia by issuing shares or financial products to Australian investors must typically comply with the disclosure requirements in the Corporations Act 2001 (Act). In some cases an exemption under the Act may apply or relief can be obtained from the Australian Securities and Investments Commission. Depending on the type of product being offered, such disclosure often requires a prospectus or product disclosure statement. Companies should carefully consider these obligations and the availability of exemptions prior to commencing a capital raise as breaching these laws can bring significant penalties including criminal liability for directors in some circumstances. Some of the more common exemptions to disclosure are:

  • the 20/12 exemption under which a company may make personal offers of securities for a value of up to $2 million to up to 20 people in any rolling 12-month period;
  • offers to sophisticated investors (determined by certain thresholds); and
  • offers to senior management.
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Trans-tasman transactions for New Zealand companies, image of a kiwi

NEW ZEALAND COMPANIES RAISING MONEY

 

 

The Act contains a trans-Tasman mutual recognition scheme allowing New Zealand companies to raise money in Australia using disclosure documents prepared under New Zealand regulation provided prescribed conditions are met.

For more information, ask us about our Trans-Tasman Capital Raising Package.

All content is accurate as at March 2017

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