If you’re the head of a foreign company looking to establish business within Australia, there are several issues that should be in the forefront of your mind. Perhaps the most important of these is that the Corporations Act 2001 (Cth) prohibits foreign companies from doing just that.

Of course, there are exceptions – as the proliferation of foreign companies engaging in business in Australia attests to. In this case, there are two primary exceptions. The first is to incorporate a subsidiary in Australia. Depending on the expected size of your operations, this might be the way to go, but it can be expensive. The alternative is registering a branch or representative office with the Australian Securities and Investment Commission (ASIC).

But, even before deciding between these entity forms, there are two questions that need to be answered.

1. Am I a ‘foreign corporation’?
   Any body, whether incorporated or not, which is formed in a territory or place outside of Australia is deemed to be a foreign corporation. This is admittedly a very broad test that should cause little confusion.
2. Am I ‘carrying out business’?
   The Corporations Act only prohibits the act of ‘carrying out business.’ Unlike the first test, this is slightly more ambiguous and thus confusing. As a rough rule of thumb, if your company’s activities in Australia are being undertaken with ‘sufficient system, repetition or continuity’ they will probably be carrying out business. It should be noted that there is no requirement that the company be making, or even seeking, a profit from the activities.

On the other hand, a single transaction that was large enough might satisfy the regulatory authorities you were carrying out business. Ultimately, there are a range of factors – none of which are determinative, but are suggestive – to be looked at. These include:

• Whether the activities are regular and repetitive in nature;
• Are the activities similar to those of other businesses in the same industry;
• Have the activities been planned, organised, and carried out in a business-like manner;
• Are the plans more permanent than temporary; and
• Are the activities commercial, and unable to be described as a hobby?

The Act, however, recognises that corporations may be engaged in Australia without carrying out a business. If you’re worried as to which category your corporation falls into, the following activities are deemed not to constitute ‘carrying out business’:

• is a party to court proceedings, a claim or a dispute in Australia;
• conducts internal affairs activities in Australia such as directors’ meetings;
• maintains a bank account;
• creates evidence of a debt or a charge on property, or secures that debt;
• subject to some conditions, conducts an isolated transaction ( if completed within 31 days);
• effects a sale through an independent contractor; or
• invests funds or holds any property.

So, I’m ‘carrying out business’. Now what?

If you answered yes to both questions above, you need to decide whether to incorporate or to register a branch or representative office. For those who aren’t sure of the differences, an incorporated subsidiary has its own independent legal status, whilst an office has a local agent who represents the foreign company. That agent is personally liable for the actions of the company within Australia.

There are several benefits to this: you do not need a local director and secretary (as all incorporated entities do in Australia), plus there can be taxation benefits. To register so, you must complete the following steps:

1. Check your name
   As with incorporation, you must ensure your company’s name is available. ASIC will not allow a name to be registered if it is misleading (e.g. as to the company’s activities), uses particular words (such as ‘university’), is already registered to another company, or is illegal.
2. Reserve your name
   This step is optional, but reservation costs only AU$41 (as of 2011) and protects your chosen name from that point forward. Otherwise, you could go through the process, only to discover you have been pipped to the post. You need ASIC Form 410 to complete this step.
3. Fill out ASIC Form 402
   This is the Application for Registration. This is the point you need to have all the details present such as the details of the directors of the company and of the local agent and of the registered office. It’s not necessary to have your own office, but if not, you must have consent from the owner for you to use that address.
4. Assemble the necessary documentation
   Before you send off Form 402, you have to ensure all the necessary documents are included. This is
• A memorandum of appointment of, and power of attorney for, the local agent;
• A certificate of registration or incorporation (or a similar document) that confirms the foreign company is currently registered in its place of corporation;
• A certified copy of the company’s constitutions, bylaws or equivalent;
• If a director is resident in Australia, a memorandum stating the powers of those directors;
• A notice of any charges on company property held in Australia; and
• A certified translation of any document not in English.
5. Submit the application
   Once you’ve completed all the paperwork, submit the application, along with the appropriate fee (currently AUD$426) to ASIC. They will issue a Certificate of Registration of a Foreign Company and give your company an Australian Registered Body Number (ARBN).

But it doesn’t stop there…

Of course, your obligations don’t stop with registration.

1. Properly display your company’s name
   If your place of business is accessible to the public, the company’s name must be displayed in legible characters, along with its place of origin and the words “registered office”. Additionally, if liability of the company’s members is limited, “Ltd” must follow the name.
2. Use your ARBN correctly
   The company name, followed by the words ‘Australian Registered Body Number’ and the number itself, must also appear on all public documents issued by the company, including the company’s letterhead as well as every instrument issued by the company. These documents must also include the company’s place of origin, and the limited liability (if any) of its members, as above.
3. Retain a local agent
   Your agent is responsible for all of the company’s acts and will be personally liable for any penalties imposed on the company. If they cease to act for you, you must appoint a new one by submitting the appropriate form to ASIC or through a power of attorney.
4. Lodge Financial Statements
   Like any Australian company, you must lodge financial statements with ASIC once every calendar year. This statement must include the company’s balance sheet, profits and losses, and cash flow statement to the end of the previous financial year. Several other documents must also be lodged, such as a statement verifying the financial statements of a foreign corporation.
5. Notify ASIC of changes
   If any of the directors change, if the registered office, or its opening hours change, if the businesses winds up or if there are any new charges on the company property in Australia, you must notify ASIC.

Other Requirements and Considerations

There are a few matters that you should consider before proceeding in a foreign country:

• Have you chosen the correct market entry mode? Have you considered risk mitigation issues? What is your exit strategy?
• We also emphasise that you should consider registering all intellectual property rights or assets owned by your business before engaging in trade in the foreign market.
• If you are planning an international business expansion or to engage in international trade, do you have a realistic budget to achieve your international business goals?

To obtain further information on international business development strategies, please view our business planning and business consulting services in our Inveiss Business website.

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Although we have made every effort to ensure the information has been obtained from reliable sources, Inveiss Legal Pty Ltd is not responsible for any errors or omissions. In no event will Inveiss Legal Pty Ltd, or its directors, agents or employees, be liable for any decision made, or withheld, in reliance of the information contained herein.