The main types of limited liability companies used in Australia with share capital are:

Other types of companies with limited liability and share capital also exist in Australia, but these are less common. These are:

Foreign investors incorporating a company in Australia will commonly use proprietary companies, which have the benefit of a limited liability structure and are subject to fewer restrictions than public companies.

Unlisted companies must have at least one share on issue. There are no other minimum share capital requirements.

The Australian Securities Exchange (ASX) (www.asx.com.au/) Listing Rules impose a "share spread" requirement in respect of listed companies, requiring that the main class of shares are widely held so as to maintain a liquid market. At the company's listing, it must meet ASX's minimum spread requirement by ensuring the entity has at least 300 non-affiliated security holders holding a parcel of shares with a value of at least AUD2,000. The ASX will not accept security holdings obtained by "artificial" means as counting towards the minimum spread requirement (ASX GN-1 provides guidance on what is meant by obtaining spread by artificial means). The initial issue price of each share must be at least 20 cents.

Ordinary shares are the most common type of share issued by companies, and do not carry special or preferred rights. Ordinary shares entitle a shareholder to vote and participate in dividends or distributions of assets on the same terms as the other ordinary shareholders.

Preference shares typically entitle a holder to priority in relation to dividends or distributions of the company's assets on winding-up. Preference shares issued by an unlisted company may or may not have voting rights. Preference shares issued by a listed company must allow the shareholder to vote on certain matters.

Preference shares can be redeemable, in which case the shares can be redeemed in accordance with the terms of their issue. Once a redeemable preference share has been redeemed, the share is cancelled (together with any rights attaching to the share).

Partly paid shares are issued to a shareholder without the company requiring full payment of the issue price at the time of issue. The company can call on the shareholder for the outstanding amount unpaid on the share at a future time. A partly paid shareholder's rights are typically proportional to the amount paid on the share (for example, a share paid up to 50% would give the holder a right to 50% of a vote).

In addition to the shares discussed above, a company can issue debentures and grant options over unissued capital.

Both unlisted public and proprietary companies must have a minimum of one shareholder. A listed company must have a minimum of 300 shareholders at the time of listing (see Question 2).

The Australian Securities and Investments Commission (ASIC) is an independent government body and acts as Australia's corporate regulator. ASIC has a federal jurisdiction and entities are formed at a national level. ASIC performs most of its functions under the Corporations Act 2001 (Cth) and is given its power under the Australian Securities and Investments Commission Act 2001 (Cth).

A shareholder's rights generally include:

Some of these rights can be varied by:

Shareholders have a number of statutory protections and rights available to them, regardless of the quantity of shares they hold. These include:

The right to apply to the court for orders in cases where majority shareholders, or the directors, act in an oppressive or unfairly prejudicial manner towards a single shareholder does not have a minimum shareholding requirement, and can result in a broad range of orders, including:

Shareholder groups can be highly influential in monitoring a company's actions. The shareholders' ability to call meetings of the company and propose resolutions (see Question 15 and Question 16) means that dissatisfied shareholders have a powerful tool at their disposal for keeping directors accountable. Shareholders who amass enough support to call a members' meeting and propose a resolution may be able to remove individual directors, "spill" the board or pass other resolutions that affect the operation of the company.

Public companies with more than one member must hold an annual general meeting (AGM) each calendar year, within five months after the end of its financial year. There is no such requirement in respect of proprietary companies.

The following items must be presented at a public company's AGM (each in respect of the last financial year):

A motion to approve the company's remuneration report must also be put to members of a listed company at its AGM.

Some corporate actions can only be taken if approved by shareholders in a general meeting. For example, listed companies require shareholder approval in respect of:

For further examples of corporate actions requiring shareholder approval, see Question 14.

Separate to an AGM, a company can hold an extraordinary or special meeting. This is usually referred to as a "general meeting". Members can request the directors to call a general meeting at any time provided that they hold at least 5% of the votes that may be cast at a meeting. The request for a meeting must be in writing and it must state any resolution to be proposed at the meeting. It must also be signed by the member(s) making the request before being given to the company. Alternatively, members who collectively hold at least 5% of the votes eligible to be cast at a meeting can call a meeting of the company (see Question 15).

Ordinary resolutions require a simple majority to pass (that is, more than 50% of votes cast in favour). Some decisions that require an ordinary resolution include:

Special resolutions are required for specific decisions as identified in the Corporations Act 2001 (Cth). A minimum of 75% of the votes cast must be in favour for a special resolution to pass. Some decisions that require a special resolution include:

A company can hold an AGM or a general meeting in two or more locations using any form of technology, or as a virtual-only meeting if expressly required or permitted by the company's constitution, that gives the members as a whole a reasonable opportunity to participate in the meeting.

Proprietary companies can pass resolutions (without holding an AGM/general meeting) by way of a document circulated among, and signed by, the company's membership. The resolution is passed when the last member signs. Public companies cannot pass resolutions by circulating written resolutions.

Notice of an AGM or a general meeting must be given to members at least:

Generally, the members of an unlisted company can consent to a meeting being held on short notice if:

Notice must be given to each member entitled to vote at the meeting, each director and the company's auditor.

The notice of an AGM/general meeting must contain the following information:

The notice of the meeting must also be accompanied by, or contain, sufficient information relating to each resolution to allow shareholders to make an informed decision on how to vote (see Question 27 for details on how meeting-related documents can be provided to shareholders).

The quorum to hold an AGM/general meeting and pass resolutions can be set by a company's constitution. If the constitution is silent on this point, the Corporations Act 2001 (Cth) provides for a quorum of two members.

Typically, voting is conducted by a show of hands, with the option to demand a poll under certain circumstances. A poll can be demanded by:

For listed companies, every resolution set out in the notice of a meeting must be decided on a poll, regardless of anything to the contrary in the company's constitution.

The percentage of votes required to pass a resolution varies depending on the object of the resolution. Most resolutions can be passed by ordinary resolution with a vote in favour of 50% of votes cast. Other resolutions can only be passed by a special resolution (being a vote in favour of 75% of votes cast) or unanimous resolution. The type of resolution required will depend on the relevant instrument requiring the resolution (for example, the company's constitution, legislation or regulatory materials). See Question 14 for the voting requirements that apply to certain types of resolution.

Voting rights can vary by share class, depending on the terms attaching to the shares under the constitution or a shareholders' agreement. Weighted voting rights (which can provide disproportionate votes to certain classes of shares) are possible in proprietary companies but not those listed on the ASX.

Voting by proxy is common practice. While proprietary companies are not required to permit proxy voting under their constitution, public companies must allow shareholders to vote by proxy and must adhere to the rules set out in the Corporations Act 2001 (Cth).

Proprietary companies can pass resolutions in writing without holding a meeting, provided that the company's constitution does not contain provisions to the contrary. The written resolution must contain all information that the company is required to provide to shareholders in relation to the resolutions, and is passed if all members entitled to vote sign their approval.

In addition to the public company requirements discussed above, listed companies must comply with the Australian Securities Exchange Listing Rules that relate to share rights and voting. Holders of ordinary or preference shares in a listed company must be entitled to vote on a show of hands and on a poll (in the case of a poll, in proportion to the amount paid up on the shares held by the member).

Members can aggregate their shares for the purpose of exercising their voting rights, but must be careful of breaching the statutory provision against acquiring a relevant interest in 20% or more of the voting rights in a listed company or an unlisted company with more than 50 members. A breach can arise where an agreement to vote a certain way on a resolution creates an "association" between the members in question.

While the right to vote cannot be assigned, shares can be held on trust under which a trustee is obligated to exercise the right to vote attaching to the shares in a particular way. Shareholders can also be obligated to exercise their vote under the terms of a shareholders' agreement. If the company’s constitution or shareholders' agreement does not prohibit a shareholder from entering such a contract, the exercise of that shareholder’s vote may be enforceable by way of a court-ordered injunction.

Certain corporate actions require shareholder approval, with approval levels varying depending on the action in question. Some examples of actions that require shareholder approval are:

Usually, the directors of a company call AGMs/general meetings. However, members who hold at least 5% of the votes that are eligible to be cast at a meeting can make a written and signed request to the company directors that an AGM/general meeting be held. In response, the directors must call the meeting within 21 days and hold the meeting within two months of the signed request.

Alternatively, members who collectively hold at least 5% of the votes that may be cast at a meeting can hold an AGM/general meeting of the company themselves. However, these members must bear the cost of holding that meeting and must (to the extent possible) comply with the usual requirements for calling and conducting that meeting.

On application by any director or member who can vote, the court can also order an AGM/general meeting of the company's members, if it is impracticable to call the meeting in any other way.

Members who together hold at least 5% of the votes that are eligible to be cast at a general meeting can give notice to the company that they propose to move a resolution at the next general meeting (that occurs more than two months after the notice is provided to the company).

The notice must be in writing and must contain the wording of the resolution that will be proposed. The notice must also be signed by all of the members that propose to pass the resolution at the general meeting.

The members proposing the resolution can also require the company to circulate the resolution before the meeting at the company's cost, if it:

Shareholders do not generally have a right to resolve matters that are not contained in the agenda of an AGM/general meeting.

At common law, the business of an AGM/general meeting is restricted to the business specified in the notice of the meeting. However, if the notice of the meeting is not sufficiently specific as to the scope of the meeting or the resolutions being put at the meeting, shareholders can be entitled to put motions to the meeting that fall within the scope of general business being conducted.

Members' rights to put resolutions to an AGM/general meeting under statute are also discussed at Question 16.

Aside from arguments going to the validity of a resolution, shareholders may be able to apply to the court for relief in certain circumstances, on the basis that a resolution of the company is oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member.

For listed companies, shareholders with at least 5% of the votes that may be cast at a meeting can request the company to appoint an independent person to observe the conduct of a poll and/or scrutinise the outcome of the poll and prepare a report, a copy of which must be made available to the shareholders within a reasonable time after the request.

Proprietary companies. Directors of proprietary companies can be elected by a resolution of:

In each case, a simple majority of votes elects the nominee.

If a director is elected by a resolution of the board of directors, the shareholders must confirm the election at an AGM/general meeting within two months, or the person ceases to be a director.

The company's constitution can vary or exclude these rules.

Unlisted public companies. Directors of public companies are appointed in the same way as proprietary company directors. However, if the current directors elect the director, shareholders must confirm the election at the company's next AGM.

Listed companies. A listed company must hold an election of directors each year in addition to complying with the public company requirements.

A director of a listed company must stand for re-election if they intend to hold office beyond the later of either:

This rule does not apply to sole managing directors of a company, but does apply if there is more than one managing director.

The board of directors or the shareholders of a proprietary company can remove a director by ordinary resolution. The company's constitution can alter or exclude this rule.

Directors of public companies (both listed and unlisted) can only be removed by a resolution of the members. They cannot be removed by the other directors.

After an Australian corporation is incorporated, a director must be appointed at an AGM/general meeting by passing an ordinary resolution. This rule can be amended or excluded by the company's constitution. Subject to confirmation by the company's membership, corporations can also permit their board to appoint a director within two months of appointment (for proprietary companies) or by the next AGM (for public companies).

Aside from disputing the validity of a directors' resolution, shareholders may be able to apply to the court for relief on the basis that the conduct of the company's affairs is, as a result of the directors' resolution in question, contrary to the interest of the members as a whole, or oppressive to, unfairly prejudicial to or unfairly discriminatory against a member. The applicant who seeks such relief must hold at least one share.

Shareholders can also use their ability to convene an AGM/general meeting and propose a resolution to remove one or more of the directors if the shareholders consider that the directors are not acting in their interests. The circumstances in which shareholders can call meetings and propose resolutions are discussed at Question 15 and Question 16.

The directors of a company owe duties to the company and its shareholders based on the principles of fiduciary duty and the requirement for a director's loyalty to the company. Directors' duties exist at common law and statute.

At common law, directors have a duty to:

Under the Corporations Act 2001 (Cth), directors have a duty to:

Companies cannot exclude liability for breaches of directors' duties and cannot indemnify directors for such breaches. However, the company can take out insurance protecting the director from liability and pay the relevant insurance premiums (with the exception of liability arising from the director's improper use of position or information). Relief from liability may also be available by way of court order, ratification of an action or decision by the AGM/general meeting of a company.

Directors' duties are owed to the company as a whole and do not extend to individual shareholders. As such, standing to pursue directors for breaches of their directors' duties attaches to the company in the event of a breach, and not the shareholder. However, a member can bring proceedings against a director who has breached their duties on behalf of the company with the approval of the court.

Directors have a duty to avoid putting themselves in a position where their own personal interests are in conflict with the duties they owe to the company. Conflicts can also arise where the director has duties to a third party (such as another company) that may require the director to take conflicting courses of action or put the interests of one party before the other.

The courts take a practical approach in assessing the existence of a conflict. The courts require a "real sensible possibility of conflict", not merely a theoretical conflict, before finding that a director has breached the duty to avoid a conflict.

Directors can act despite the existence of a conflict provided that the director fully discloses the particulars of the conflict to the company, and the company provides its fully informed consent for the director to act.

In the case of public companies, the conflict rule is reinforced by prohibitions on directors from voting at, or attending, meetings if they have a material personal interest in the subject of the meeting. The other directors can resolve to include the conflicted director in the meeting if they are satisfied that the potential conflict will not affect the director's judgement.

There are restrictions on public companies granting financial benefits to related parties, including its directors. Any such benefit granted to a director must be on arm's-length terms, fall within an exception relating to the employment and remuneration of employees and officers, or otherwise be approved by shareholders.

The Australian Securities Exchange Listing Rules (Chapter 10) also regulate a listed company's transactions with persons in a position of influence, including directors. Shareholder approval is required for the following transactions:

There is no statutory requirement that the board of unlisted companies contain a certain number of non-executive, supervisory or independent directors. For listed companies, the Australian Securities Exchange Corporate Governance Council Principles and Recommendations make a non-binding recommendation that listed companies should have:

If a listed company does not follow these recommendations, it must explain why this is so. See Question 29 for a discussion of the Australian equivalent of the "comply or explain" regime.

There is no general requirement that directors' service contracts be disclosed. However, listed companies must present a remuneration report, containing details of the remuneration of executives and directors, at the company's AGM.

Members of a company holding at least 5% of votes that can be cast at a meeting of the company, or a group of 100 members entitled to vote at an AGM/general meeting of the company, can direct the company to disclose the details of all remuneration paid to the directors at any time. The company must comply with such a direction by:

In unlisted companies, the directors’ remuneration is determined by resolution of the members: however, this rule can be altered or varied by the constitution.

In listed companies, the members pass a resolution to approve a "remuneration pool", comprising the total amount of remuneration the company can pay to its non-executive directors. The executive directors' pay must be reasonable and must not include a commission or percentage of operating revenue.

The directors of a proprietary company can appoint an auditor if the company has not done so in an AGM/general meeting.

The directors of a public company must appoint the company's first auditor within one month of registration, unless an auditor has been appointed at an AGM/general meeting. An auditor elected by the directors holds office until the first AGM after registration. The position of auditor is filled at the first and all subsequent AGMs by a resolution of the members. If there is a casual vacancy in the position of auditor, the directors must appoint a new auditor within one month.

A proprietary company's auditor can be removed by an ordinary resolution of shareholders at an AGM/general meeting. The auditor must be given two months' notice of the intention to pass the resolution removing the auditor.

If a public company's auditor is removed at an AGM/general meeting, a new auditor can be appointed at the same meeting by special resolution if the replacement auditor has been nominated in accordance with the requirements of the Corporations Act 2001 (Cth). If the nomination requirements have not been complied with, the meeting can be adjourned, notice of nomination provided to the nominee, and the nominee appointed by ordinary resolution when the meeting is reconvened.

Listed companies must rotate their auditors. A person who plays a significant role in the audit of a listed company for five successive financial years is ineligible to play a significant role for the next two financial years. The board of directors or the Australian Securities and Investments Commission can extend the eligibility term in certain circumstances.

A company can appoint an individual, audit firm or audit company as auditor. Public companies must appoint a registered auditor, while proprietary companies are exempt from this rule if the Australian Securities and Investments Commission provides its approval.

There are general requirements that auditors be independent of the company they audit. Auditors are not permitted to act if there is an unresolved conflict of interest, defined in the Corporations Act 2001 (Cth). It is a defence that the auditor utilises a quality control system that provides reasonable assurance that the auditor is not in breach of its independence obligations.

The Corporations Act 2001 (Cth) sets out a series of relationships that should be considered when determining whether a conflict exists (for example, relationships between the auditor and the company, current or former directors and current or former members of management). There are also specific requirements imposed for the independence of individuals, audit companies and audit firms.

Auditors must comply with the auditing standards set by the Auditing and Assurance Standards Board when performing their duties as company auditor. Auditors are also subject to the provisions of the Corporations Act 2001 (Cth) that prevent a party acting as an auditor from making false and misleading statements or omissions.

In addition to the above, auditors can be directly liable to the company on a contractual basis. The auditor is engaged by the company through a contract, and it is therefore required to discharge its services in accordance with the terms of that agreement.

While there are statutory limits on the exemption or indemnification of auditors by a company, claims for damage for economic loss arising from misleading or deceptive conduct may be decided by way of proportionate liability (that is, a claimant can only recover against an auditor for the proportion of loss for which the auditor was responsible).

Specifically regarding an auditor's liability to shareholders, an auditor may owe a duty of care to a shareholder if they know that that person or investor intended to act, or refrained from doing so, based on the auditor's findings. However, this is difficult to establish if an auditor has produced a general report in line with statutory and professionally mandated guidelines.

All public companies and large proprietary companies are required to prepare annual financial reports and directors' reports for each financial year, and to lodge these reports with the Australian Securities and Investments Commission. "Disclosing entities" (for example, listed public companies and companies with over 100 shareholders that have issued shares under a disclosure document under the fundraising provisions of the Corporations Act 2001 (Cth)) must also produce and lodge half-yearly reports. Disclosing entities and registered managed investment schemes must lodge their financial reports within three months of the end of the financial year. All other companies must lodge their financial reports within four months of the end of the financial year. Small proprietary companies are only required to prepare financial and directors' reports when they are directed to do so by members holding at least 5% of the votes in the company.

A company must satisfy two of the following three criteria to qualify as a small proprietary company:

Financial reports include three elements:

The directors' report must include general information about the business, in addition to specific information required by the Corporations Act 2001 (Cth).

Financial and directors' reports, or a concise report that complies with the requirements of the Corporations Act 2001 (Cth), must be provided to shareholders by either:

Shareholders must be notified of the online location of the reports. If the company is required to produce an auditor's report, that report must also be provided to the shareholders.

Companies are required to keep members' registers, options registers and debentures registers. Members of the company can review that company's registers free of charge.

Companies are also required to keep minute books containing the minutes of AGMs/general meetings, directors' meetings and all resolutions passed without a meeting. Members have a right to review the company's minute books free of charge.

Public companies and disclosing entities that are not registered schemes must provide reports to members by the earlier of either:

If a small proprietary company is requested by members to provide financial reports, the company must report to the members by the later of either:

Meeting-related documents (for example, notices of meetings, proxy forms, minute books) and certain other documents can be provided to shareholders in physical form or electronically if, at the time the document is sent, it is reasonable to expect that the document will be readily accessible so as to be useable for subsequent reference.

Shareholders can elect to receive such documents in physical or electronic form, which may be a standing election or an ad hoc request and relate to all documents, a specified class of documents or a single specified document. Shareholders can also elect not to be sent annual reports or other documents prescribed by the regulations.

At least once in each financial year, a public company must notify shareholders of their right to make an election to receive documents in physical or electronic form, or not to receive them.

Listed companies are subject to continuous disclosure obligations under the Australian Securities Exchange Listing Rules (Listing Rules). The Listing Rules require listed companies to disclose information to the market that a reasonable person would expect to have a material effect on the price or value of the company's securities. They must inform the ASX and market once the entity is, or becomes, aware of such information. There are a limited number of exceptions.

The continuous disclosure requirements in the Listing Rules are reinforced by the Corporations Act 2001 (Cth), which imposes civil liability on any person involved in a listed entity's contravention of the continuous disclosure requirements.

Listed companies are also required to undertake periodic disclosure in relation to half-year and annual reports. In addition to the Corporations Act 2001 (Cth) requirements, listed companies are required to include certain specific information in the reports (see Question 27).

The Australian Securities Exchange Corporate Governance Council Principles and Recommendations are a set of principles and recommendations that apply to the corporate governance practices of listed companies.

Compliance with the principles and recommendations is monitored on an "if not, why not" basis, similar to the "comply or explain" approach utilised in other jurisdictions. The annual report of a listed company must contain a corporate governance statement (or direct shareholders to an online location where the statement can be found) that explains whether the company is complying with the principles and recommendations and, if not, why not.

See Question 27.

A typical shareholders' agreement contains some or all of the following provisions:

Shareholders' agreements will also typically include a provision that describes the interaction between the company's constitution and the shareholders' agreement.

A shareholders' agreement is typically a contract between shareholders and the company. As such, the agreement can only be enforced against parties to that contract. However, it is common for shareholders' agreements to contain terms that have an effect on transactions with third parties (for example, a tag-along clause that requires a majority shareholder to negotiate with a potential purchaser of its shares on the basis that the remaining minority shareholders can elect to tag along and sell their shares into that arrangement).

Generally, shareholders' agreements do not need to be publicly disclosed. However, there may be some instances in which a shareholders' agreement will need to be provided to the Australian Securities and Investments Commission (for example, as one of a number of documents that the company must lodge due to its relevance to a particular type of corporate action).

The most common form of distribution in Australia is a franked dividend paid to shareholders. When a shareholder receives a franked distribution, they are provided a "grossed up" distribution which includes the distribution and a franking credit in their assessable income. Australian resident members are then entitled to a tax offset equal to the franking credit. A franked distribution paid to partnerships or trusts is generally treated as flowing indirectly to the partners or beneficiaries. As such, the final recipients of the distribution are entitled to a tax offset.

Dividends can be paid by a company to its shareholders if:

A public company's constitution can provide that different classes of share capital have different dividend rights, as can a special resolution passed by the shareholders. The directors of a proprietary company can pay dividends as they see fit (subject to the terms on which the shares were issued).

In the case of listed companies, the Australian Securities Exchange Listing Rules impose additional constraints on dividend rights. Holders of preference shares must be entitled to a dividend at a commercial rate in preference to holders of ordinary shares, and a listed company cannot remove or change a shareholder's right to receive dividends in respect of particular shares (with limited exceptions). Holders of partly paid shares are only entitled to the proportion of a dividend corresponding to the proportion of the shares they have paid up.

Companies can pay interim dividends to their shareholders.

Shareholders can generally grant security interests over their shares, unless they are prohibited from doing so under some form of contractual agreement (for example, the company's constitution or a shareholders' agreement).

A company can only provide financial assistance to a person acquiring shares in the company or its holding company if:

There are additional requirements for special resolutions to be passed by the holding company of the company providing the assistance where the holding company is a listed company or an Australian ultimate holding company.

The fact that the provision of financial assistance for the purchase of shares is approved by the shareholders or otherwise permitted by statute does not relieve directors from their directors' duties in relation to the transaction.

The Corporations Act 2001 (Cth) states that shares in a company are transferrable as provided by the company's constitution. However, restrictions on the transfer of shares do apply in certain circumstances.

A transfer of shares in a company under administration and after a company commences winding-up is void, subject to any orders to the contrary made by the court or the transferor receiving written consent from the liquidator or administrator, as the case may be. Consent to the transfer of shares will only be given by a liquidator or administrator if they are satisfied that the transfer is in the best interests of the company as a whole. Such consent can be conditional.

The constitution of a proprietary company can impose restrictions on the transfer of shares, as can a shareholders' deed or other contractual document.

Listed companies, in contrast to unlisted companies, cannot restrict the transfer of shares unless they are permitted to do so under the Australian Securities Exchange Listing Rules (for example, the imposition of a holding lock in certain defined circumstances) or required to do so by law.

The constitution of an unlisted company can provide for pre-emptive rights that require shareholders who sell their shares to offer their shares to the current shareholders, or otherwise participate in some form of share transfer process.

The constitution of a company can also require the company to offer shares to current shareholders in proportion to their current shareholding when the company issues additional shares to raise capital.

Minority shareholders do not have an explicit power or right that allows them to alter the company's share capital structure or restrict changes to it. However, the rules imposed by the Corporations Act 2001 (Cth) relating to selective share buybacks and selective share capital reduction provide scope for minority shareholders to vote to prevent changes to the company's capital structure.

As noted at Question 14, selective share buybacks and share capital reductions require either a special resolution of members entitled to vote, or the unanimous agreement of all ordinary shareholders to proceed. Minority shareholders may have an opportunity to block these changes to the company's share capital structure as a result of the high shareholder approval threshold set by statute.

In general, shareholders are not required to personally notify regulatory authorities of a change to their shareholding.

However, if a shareholder begins to have, or ceases to have, a "substantial holding" in a listed company, or there is a change of 1% of more to their substantial holding, that shareholder must:

A "substantial holding" refers to a shareholder having a relevant interest in 5% or more of the votes attaching to the voting shares of the company when combined with the relevant interest of its associates. A relevant interest includes ownership of the shares in question, the ability to control their disposal or the ability to control how the votes attaching to the shares are exercised.

Additionally, the company must inform the relevant regulatory authority of changes to a member's shareholding in the following circumstances:

Companies can buy back their shares if they comply with the requirements set out in the Corporations Act 2001 (Cth).

A buyback of the company's shares must not materially prejudice the company's ability to pay its creditors. Additional requirements also apply, which vary depending on the type of buyback.

The 10/12 limit applies to employee share scheme buybacks, on-market buybacks and equal access scheme buybacks. These buybacks are limited to 10% of the smallest number, at any time during the last 12 months, of votes attaching to the voting shares of the company. If the 10/12 limit is exceeded, the buyback must be approved by an ordinary resolution of shareholders.

A 10/12 limit does not apply to selective share buybacks. Selective buybacks must always be approved by a special resolution of all members entitled to vote on the resolution (not including members whose shares will be bought back) or the unanimous resolution of all ordinary shareholders.

The company must notify the Australian Securities and Investments Commission of the proposed buyback not less than 14 days before the buyback takes effect. This notice must be accompanied by any information provided to shareholders (including the notice of the meeting) and, in the case of selective buybacks and equal access scheme buybacks, a document setting out the terms of the offer to buy back the shares and all documents relevant to the offer.

A shareholder will typically exit a company by:

There is no general right for shareholders to put share capital back to the company or require the company to purchase its shares. However, shareholders can have a contractual option that allows them to put their shares back to the company and requires the company to buy back the shares. The exercise of an option of this kind will require the company to comply with the buyback provisions of the Corporations Act 2001 (Cth). In the case of redeemable preference shares, the shares held by a member can be redeemed (and accordingly cancelled) in accordance with the terms of their issue.

Shareholders can be required to exit the company in some limited circumstances (for example, by the compulsory acquisition of minority holdings under the takeover provisions of the Corporations Act 2001 (Cth) or as a result of contractual provisions, such as a drag-along clause in a shareholders' agreement). In the case of a compulsory acquisition after a takeover, shares will be attributed the same value as all other shares subject to the takeover bid. In the case of a contractual exit requirement, the terms of the contract will typically set out how the shares are to be valued.

Companies are permitted to cancel shares provided that the reason for cancellation is covered under the Corporations Act 2001 (Cth). Companies are generally required to notify the Australian Securities and Investments Commission (ASIC) within one month after the shares are cancelled: however, different time periods apply for different types of cancellations.

Redeemable preference shares. Redeemable preference shares are redeemable:

On redemption, the shares are cancelled. The company must notify ASIC within one month after the cancellation.

Share buybacks. A company can reclaim issued shares by purchasing them from current members. The company must notify ASIC of the buyback with at least 14 days' notice before a resolution is passed, or a buyback agreement is entered into.

Capital reductions. A company can reduce its share capital and return money paid to members if the reduction is fair and reasonable to the shareholders as a whole and does not materially prejudice the company's ability to pay creditors. An equal reduction must be approved by an ordinary resolution, while a selective reduction must be approved by a special resolution. ASIC must be informed of both types of reductions at least 28 days before the relevant AGM/general meeting of a public company, or 21 days for a company other than a public company.

Forfeited shares. A company can cancel shares that have been forfeited under terms on which the shares are on issue, by a resolution passed at an AGM/general meeting. ASIC must be notified within one month after the cancellation of the shares.

Other share cancellations. Shares can also be cancelled when:

A company can also reduce its share capital by cancelling any paid-up share capital that is not represented by available assets or is lost in certain circumstances. Shares cannot be cancelled unless the reason for the cancellation is stipulated in the Corporations Act 2001 (Cth).

The shareholders of a listed company must approve the acquisition or disposal of any substantial asset by passing an ordinary resolution (that being an asset with a value equal to 5% or more of the equity interests of the entity) when the asset is being transferred to, or from, one of the following parties:

Shareholder approval can also be required (at the discretion of the ASX) if a listed company proposes to make a significant change to the nature or scale of its activities. If the significant change involves the entity disposing of its main undertaking, the approval of holders of ordinary shares will be required.

A company can only change company type by satisfying the requirements of the Corporations Act 2001 (Cth), which include the passing of a special resolution by the members in most cases, and the unanimous assent of the members in the case of a conversion to an unlimited company.

The rights of shareholders following a conversion to a new type of company will be varied to the extent necessary for the structure and operation of the company to satisfy the requirements that apply to the new company type. For example, the rights of shareholders on the conversion of a proprietary company by shares to a public company limited by shares will attract the rights applicable to the latter, and exclude the rights exclusive to the former.

A company limited by shares cannot be converted to a company limited by guarantee. This would require a complete restructure of the company and the unwinding of all share capital that was issued.

The rights of shareholders once a company becomes insolvent depend on the insolvency regime that applies to the company. Generally, however, a shareholder's rights are limited in an insolvency scenario.

If a liquidator is appointed, the liquidator's primary duty is to the creditors of the company. The shareholders have limited rights to request a separate meeting of shareholders to decide whether a committee of inspection should be appointed to assist the liquidator. The liquidator can require shareholders with partly paid shares to pay the amount outstanding on those shares.

A voluntary administrator, if appointed, assumes the power of the company and the directors. Shareholders do not have a right to vote on the future of the company once a voluntary administrator has been appointed. If the company's creditors approve a deed of company arrangement, the shareholders will be bound by that deed.

A receiver, if appointed, has a duty to the shareholders to take reasonable care to sell charged property for market value or, failing that, the best price the receiver can reasonably obtain.

Shareholders can instigate the winding up of a company by making an application to the court in the circumstances detailed in the Corporations Act 2001 (Cth) or by way of a special resolution of the shareholders at an AGM/general meeting.

The concept of a corporate group is recognised under Australian tax legislation. Australian companies can form a tax consolidated group, under which a group of wholly-owned companies will be treated as a single entity for income tax purposes.

The Australian Securities and Investments Commission has published a Class Order that augments the provisions of the Corporations Act 2001 (Cth), allowing the wholly-owned subsidiaries of a parent company to enter into a deed of cross guarantee under which the company group is only required to produce one set of accounts (as opposed to a set for each of the individual group companies).

Notwithstanding the above, directors continue to owe their duties to the relevant company and not to the group as a whole.

A controlling company does not have duties or liability to the minority shareholders of a company it controls. However, minority shareholders do have the ability to apply to the court for relief in cases where the minority shareholders are being oppressed or subjected to unfair prejudice by a majority shareholder (in this case, the controlling company) or the directors of the company (which are likely to have been appointed by the controlling company). The court has a broad discretion as to the remedies it can grant in favour of oppressed minority shareholders.

A company must not acquire shares in itself except under a buyback, in relation to the acquisition of an interest (other than a legal interest) in fully paid shares if no consideration is given for that acquisition, or under a court order.

Further, a company must not take security over shares in itself or its holding company unless: