A company registered under the Corporations Act 2001 (Cth) (“Act”) is treated as being a legal person. This means it has the right to own property, operate a business, enter into agreements and partake in legal proceedings. However, companies can be deprived of their legal personality by being removed from the Australian Security and Investment Commission (“ASIC”) register of companies. The consequences of the registration can be significant for the directors and shareholders of a company. If you have an interest or involvement in a company, you should be aware of:
- How companies can become deregistered;
- The effects of deregistration on a company and its property; and
- How companies can be reinstated.
HOW COMPANIES CAN BE DEREGISTERED
A company can be deregistered involuntarily or at ASIC’s initiative.
A company may be deregistered voluntarily if:
- All shareholders of the company agree to the deregistration.
- The company is not operating a business.
- The company’s assets are worth less than $1,000.00.
- The company does not owe any outstanding fees or penalties payable under the Act.
- The company has no outstanding liabilities.
There are three circumstances in which a company may be deregistered at ASIC’s initiative. ASIC may decide to deregister a company if:
- The company is six months’ late to respond to a request for information from ASIC, has not lodged any other documents with ASIC in the last 18 months and ASIC has no reason to believe the company is operating a business; or
- The company has not paid its annual registration fee for 12 months; or
- The company is being wound up and ASIC has reason to believe either that the liquidator is no longer acting or the company’s affairs have been fully wound up and the information the liquidator should have lodged is at least six months late or the company’s affairs have been fully wound up and the company has no property or not enough property to cover the costs of obtaining a court order for deregistration.
IMPLICATIONS OF DEREGISTRATION
Once a company is deregistered it loses its legal personality. The company’s directors cannot make any decisions in respect of its company or its property. This means that the company can no longer own property, or enter agreements or carry on legal proceedings. Any property that was owned by the company vests in ASIC. Anyone who believes they have an interest in the company’s property must apply to ASIC in order to be able to deal with that property. Any legal proceedings in which the company is a party to cannot be continued. The effects of deregistration are such that the company is simply unable to carry on any functions.
A company can be reinstated after it has been deregistered. This means that it is restored to the ASIC register of companies and regains its legal personality. The deregistration is treated as if it never occurred. A company can be reinstated either by application to ASIC or by application to the court for an order for reinstatement.
In order to apply to ASIC for reinstatement of a company, the applicant must:
- have been a director of the company when it was deregistered;
- not be banned or disqualified from being an office holder; and
- must be able to prove the company was operating a business when it was deregistered. Persons considering making an application to ASIC for reinstatement of the company should check if the company name is still available, the costs of reinstatement and whether they are likely to satisfy the above criteria.
A court order for reinstatement can be sought by persons who are disadvantaged by a company’s deregistration. For example, creditors and/or shareholders of the company. However, shareholders can only apply to a court for reinstatement where there are no company directors that are able to make that application. A court order for reinstatement can also be sought where an application to ASIC for reinstatement has been refused.
If you are an office holder of a company, it is important to ensure compliance of any fees and penalties under the Corporations Act in order to avoid deregistration.
If you require any further advice on the effects of deregistration of a company or reinstatement of a company, please do not hesitate to contact Lynn & Brown Lawyers.
About the author:
Stirling Owen who is a Perth lawyer and an Associate at Lynn & Brown Lawyers. Stirling is experienced in commercial law, litigation, probate & Wills and employment law.