Registration Procedures for Foreign Companies and Investment in Australia Given that Australia is now in its 16th year of uninterrupted economic growth, foreign investors should be well informed of the formality on how to open their businesses in Australia. The Organisation for Economic Co-operation and Development (OECD) forecasts Australia’s economic growth to be 3.3% in 2007 and 2008, well above a forecast average OECD growth rate of 2.7%. The leading investor countries at 31 December 2006 were: United States of America ($362.8 billion or 25%) United Kingdom ($352.7 billion or 24%) Japan ($51.0 billion or 4%) Hong Kong (SAR of China) ($38.5 billion or 3%) Australia's global appeal as an investment nation continues to attract foreign money. The total stock of foreign direct investment (FDI) rose 11.3% during 2006 to A$315.47 billion, according to the most recent data from the Australian Bureau of Statistics. The increase in economic growth can be attributed to the Corporations Act, the Australian Securities and Investment Commission (ASIC) and the Foreign Investment Review Board (FIRB) of the Australian Government. This body of business laws and agencies together promote corporate governance in Australia and transparency giving investors confidence to invest or start business in Australia
Legislation
Foreign investments are regulated under the Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA), it requires notification to the Federal Treasurer of proposed acquisitions by foreign persons of a substantial shareholding (15% by an individual, or 40% where two or more persons act together) in an Australian company with total assets valued in excess of A$50 million (A$800 million for prescribed foreign investors in non-sensitive sectors) or a substantial shareholding in an Australian company where more than 50% of its assets are Australian urban land. Then the Treasurer makes the final decision and may prevent investment deemed to be ‘contrary to the national interest’. The ASIC has power to ensure business is being conducted in accordance with Corporations Act 2001(Cth) . Registration with ASIC To carry on business in Australia, a foreign company must be registered with ASIC. A foreign company is required to register as carrying on business in Australia if it: 1. Has a place of business in Australia (eg a permanent office); 2. Establishes or uses a share transfer office or share registration office in Australia;
3. Administers, manages or deals with property in Australia as an agent, legal personal representative or otherwise. In order to register with ASIC a foreign company must: Establish that the company name is available Appoint at least one local agent (either a natural person in Australia or an Australian company) who: o Is authorised to accept notices and service of process on behalf of the foreign companyo I responsible for ensuring compliance with the Corporations Act and o May be personally liable for penalties imposed for breaches of the Corporations ActEstablish a registered office within Australia which communications and notice may be sent. Lodge with the ASIC: o certified copies of its current certificate of incorporation or registration and its constitution.o Details of the directors and a memorandum stating the powers of any resident Australian Directors or members of any Australian local board of directors.o Details of Security interests over property located within Australia or its external territories ando Details of its registered office or principal place of business in its country of origin and its registered office in Australia.Registration of a foreign company is complete on lodgement of these documents and payment of the relevant fee. A foreign company should be aware that, the company is not required to register as carrying on business in Australia if it merely: Maintains a bank account; Effects a sale through an independent contractor; Solicits or procures an order that becomes a binding contract only if the order is accepted outside Australia; Creates evidence of a debt, or creates a charge on property; Services or collects any of its debts; Conducts an isolated transaction that is completed within a period of 31 days and is not repeated from time to time; Invests any of its funds or holds any property. FIRB Guidelines
Acquisitions of shares and other business assets require foreign investment approval in certain instances based on the size and type of investment. All acquisitions of vacant land; residential real estate; accommodation facilities; shares or units in Australian urban land corporations or trust estates; or direct investments by foreign governments or their agencies require approval, irrespective of the value or the nationality of the investor. Other acquisitions have thresholds at/above which approval is required and these include: Non-US investors as at 1 January 2007 | $10 million | proposals to establish new businesses | $5 million | developed non-residential commercial real estate where the property is subject to heritage listing | $50 million | developed non-residential commercial real estate where the property is not subject to heritage listing | $100 million | - an interest in an Australian business; or
- where a non-US foreign investor acquires an interest in an offshore company that holds Australian assets or conducts a business in Australia, and the Australian assets or businesses of the target company are valued at/above 50 per cent of its total assets (and hence not eligible for the offshore takeover threshold) | $200 million | offshore takeovers where a non-US foreign investor acquires an interest in an offshore company that holds Australian assets or conducts a business in Australia, and the Australian assets or businesses of the target company are valued at less than 50 per cent of its total assets (if the Australian assets are valued at/above 50 per cent of total assets the general $100 million threshold applies) |
A foreign ownership restriction was placed on Telstra a previously privatised state owned telco in 2003. The Telstra Corporation Act 1991 requires that a total foreign ownership to 35 per cent of publicly available shares and limits individual foreign ownership to 5 per cent of publicly available shares. Hence the board’s chair and a majority of directors must be Australian citizens, and that Telstra’s head office, base of operations and place of incorporation must remain within Australia.
In another example Shell had attempted a take over bid for Australian resource company Woodside Petroleum. That take over attempt failed because the FIRB intervened to block the take over bid citing that the foreign company’s acquisition would not be in Australia’s "national interest".
Types of Business Structure
Despite the strict compliance requirements for foreign investors, we advise them to familiarise themselves on the legal and taxation implications on the different forms of business structure, should they be so minded to begin business in Australia. A business in Australia can be established by a number of structures including an individual, trust, a company, a joint venture, a partnership or a branch of a foreign company. Each form of entity will attract different tax consequences and therefore you should seek legal advice if necessary. Penalties
If foreign investors do not comply with Australian Federal and State Government rules, they may be subject to penalties such as:
1. Cancellation of contracts and/or forced sale of Australian property;
2. 2 years imprisonment or a fine of $50,000 (foreign persons);
3. a fine of AU$250,000.00 (foreign companies).
If you have any specific or general questions in relation to this article, please do not hesitate to contact us. | 
