Expanding your business operations internationally can be an exciting move. One of the most common strategies for global business expansion is by setting up a subsidiary company. Registering a subsidiary company in Australia offers numerous advantages, such as access to a stable economy, a highly skilled workforce, and a strong legal framework.
However, like any major business decision, setting up a subsidiary requires careful planning and an understanding of the legal and procedural steps involved. If you’re looking to register a subsidiary company in Australia, this guide will walk you through the essential steps and key considerations to help you get started.
What Is a Subsidiary Company?
Before we dive into the specifics of registering a subsidiary, let’s first define what a subsidiary company is. A subsidiary is a company that is controlled by another company, usually referred to as the parent company. The parent company owns a majority of the subsidiary’s shares, granting it control over the subsidiary’s operations and decision-making processes.
In Australia, a subsidiary company is typically incorporated as a private company under the Corporations Act 2001, which is administered by the Australian Securities and Investments Commission (ASIC). The parent company, which could be located anywhere in the world, will hold a majority of the shares in the Australian subsidiary, often 50% or more, to maintain control.
Steps to Register a Subsidiary Company in Australia
Now that we understand the benefits, let’s look at the practical steps for registering a subsidiary company in Australia.
Step 1: Choose the Type of Subsidiary
The first step in setting up a subsidiary is deciding on the type of entity that will be registered. Most foreign companies opt to set up a proprietary limited company (Pty Ltd). This type of company is privately owned, and it limits the liability of its shareholders. The key features of a Pty Ltd company include:
- The company must have at least one shareholder.
- There can be up to 50 non-employee shareholders.
- The shareholders’ liability is limited to the amount unpaid on their shares.
Other options, like a public company, are available but are less common for subsidiary structures due to their more complex regulatory requirements.
Step 2: Choose a Company Name
The next step is choosing a name for the subsidiary. The name must be unique and not identical to any existing company names in Australia. To check for available names, you can use the ASIC company name register. Additionally, your company name should clearly identify it as a subsidiary of the parent company.
You also need to ensure that your chosen name complies with the guidelines outlined by the ASIC. These guidelines prevent misleading or inappropriate company names.
Step 3: Register for an Australian Business Number (ABN) and Tax File Number (TFN)
Once you’ve decided on the company name, you’ll need to register your subsidiary with the Australian Business Register (ABR) to obtain an Australian Business Number (ABN). This is a unique identifier that businesses use when dealing with the Australian government and other businesses.
In addition to the ABN, your subsidiary will need to apply for a Tax File Number (TFN), which is essential for tax purposes. The TFN is required when lodging tax returns, reporting tax withheld, and making payments to the Australian Taxation Office (ATO).
Step 4: Nominate a Director
A subsidiary company in Australia must have at least one director who is a resident of Australia. This is an important requirement, as it ensures that the company is managed in accordance with Australian laws. The director will have specific legal duties, including overseeing the company’s compliance with corporate governance standards.
If the parent company is a foreign entity, it may also appoint directors from overseas, but at least one must be a resident of Australia. In cases where the parent company is unable to appoint a local director, a nominee director service can be employed.
Step 5: Register with ASIC
After choosing a company name, appointing a director, and obtaining an ABN and TFN, the next step is to register the subsidiary with ASIC. ASIC is responsible for overseeing all Australian companies, and the registration process will involve submitting several documents, including:
- A Company Registration Form outlining the subsidiary’s details.
- The Company’s Constitution or a written agreement that governs the operation of the subsidiary.
- Details of the parent company, including its name, country of incorporation, and address.
- Director and shareholder details, including personal information of the appointed directors and shareholders.
Once ASIC approves the registration, your company will be issued an Australian Company Number (ACN), which serves as a unique identifier for your business in Australia.
Step 6: Set Up the Corporate Governance Structure
Corporate governance is a crucial part of running a business in Australia, and subsidiary companies must adhere to various rules and regulations. You will need to establish the following:
- Shareholder agreements: This document outlines the rights and obligations of the parent company and other shareholders in the subsidiary.
- Company constitution: This is a legal document that defines how the company will operate, how decisions will be made, and the powers of the directors and shareholders.
These documents should be drafted carefully, often with legal assistance, to ensure that they comply with Australian corporate law.
Step 7: Comply with Ongoing Reporting and Taxation Requirements
Once the subsidiary company is up and running, it will need to comply with ongoing regulatory and taxation requirements. Some key obligations include:
- Annual financial statements: These must be submitted to ASIC every year.
- Tax returns: Your subsidiary will need to lodge tax returns with the ATO and pay any applicable taxes, including Goods and Services Tax (GST) if your business exceeds the threshold.
- Payroll tax and superannuation: If your subsidiary employs staff in Australia, you will need to comply with payroll tax regulations and contribute to employee superannuation funds.
Final Thoughts
Registering a subsidiary company in Australia can be a great way to establish a foothold in the Asia-Pacific market. With a straightforward registration process, strong legal protections, and a business-friendly environment, Australia is an ideal location for foreign companies to expand their reach.
