The legal powers of an Australian company

By Vivian Michael | Company

Photo credit:  Raw Pixel, Unsplash  

Your company has legal powers both inside and outside Australia. 

So below we'll walk through powers and internal rules for an Australian company. 

Company powers

Company powers are found in section 124 of the Corporations Act 2001 (Cth) and below is a list of those powers:

  • issue and cancel shares and issue debentures;
  • grant options over unissued shares;
  • distribute any of the company's property among shareholders;
  • grant a security interest in uncalled capital or over company property; 
  • register the company outside Australia; and
  • do anything it is able to do because of any other law.

However, it's important to note that a company limited by guarantee does not have the power to issue shares.

And, this might be pretty obvious, but it's worth stating that these powers above do not authorise a company to do an act that is in breach of State or Territory law. â€‹

Constitution

Now, if your company has a constitution, it may restrict or prohibit your company's powers. 

So, this means even if the Corporations Act says your company can do something (or it's in the list above), you may not be able to because of your constitution. 

And, yes, you may change your constitution. But, you will have to follow the any rules for changing it (usually found in the constitution itself). 

Now, what about agents acting on behalf of your company?

Agent

An agent is a person acting with a company's express or implied authority and on behalf of the company. 

In fact, an agent may enter contracts on behalf of your company.

Now, you may have someone acting as an agent because a director is away or you simply need to delegate to get things done at your company. 

So where does this power come from? the agent holds this power under section 126 of the Corporations Act. 

Execution of documents

Your company may execute a document if it is signed by: (a) 2 directors of the company; or (b) a director and a company secretary of the company; or (c) for a proprietary company that has a sole director who is also the sole company secretary - that director.                                                  

Importantly, if your company executes a document in this way, people will be able to assume that the document has been properly executed.     

Finally, this execution rule (found in section 127 of the Corporations Act) does not cancel out the agent's powers above.





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About the Author

Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to make quality business legal services accessible to Australian businesses that would otherwise DIY, rely on legacy contracts or go without.

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