Corporate Accounting

CORPORATE ACCOUNTING

Week 1 Tutorial Questions

Question 2.

Distinguish between a proprietary company and a public company.

A public company is one in which there is usually a substantial public interest in that the ownership of the company's share capital is widely spread. Public companies are entitled to raise capital through a share issue by issuing a disclosure document which entitles them to have their shares or debentures etc. listed on a Stock Exchange to facilitate transferability.

Proprietary companies on the other hand have specific limitations in terms of the amount and restrictions on its fundraising activities.

Specific features of a proprietary company include the need to have a share capital (unlike a public company which may be limited by guarantee and not merely shares):

 a requirement to have at least one shareholder and only one director (three directors for a public company) and not more than 50 shareholders (not including employee shareholders)

 not required to restrict the transfer of its shares (however it may elect to do so)

 the use of the designation "Pty" or “Proprietary” in its name

 a requirement not to engage in any fundraising activity which would require it to lodge a disclosure document with ASIC.

Question 5.

What is the purpose of a certificate of registration?

A certificate of registration is issued by ASIC as a part of the registration procedure. Providing the company complies with S117 of the Corporations Act, ASIC will:

 give the company an ACN Number

 register the company

 issue a certificate that states the company's name, ACN No. etc.

Once registered, the company is capable of performing all the functions of a corporate body.

Question 6.

What are replaceable rules and how do they differ from a constitution?

Replaceable rules are the set of internal rules (contained in the Corporations Act) governing the conduct of its operations between the company and its member directors and between members themselves [see example of such rules in ch 1].

If the rules are not adopted by the company then they must draw up a constitution which will cover much of the same issues covered by the replacement rules but may be extended or modified by the promoters of the company.