Heathfield Grosvenor Lawyers

Australian Branch Overseas Business vs Australian Subsidiary Company

This article focuses on two frequently used methods for foreign companies to carry on business in Australia. Frequently, foreign companies do so either by establishing an Australian branch of their existing overseas business (i.e. it is the overseas business which trades in Australia) or, alternatively, the foreign company establishes an Australian company as a subsidiary of the overseas company (i.e. it is the Australian subsidiary company which trades in Australia).

Australian branch of your overseas business

A “foreign company” for the purposes of the Corporations Act 2001 (Cth) (Corps Act) can be a body corporate that is incorporated outside Australia, or even an unincorporated body that does not have its head office or principal place of business in Australia. Register as a foreign company: If your “foreign company” wants to carry on business in Australia, your foreign company must be registered as a foreign company under the Corps Act with the Australian Securities and Investments Commission (ASIC). Carrying on business in Australia: Whether or not a foreign company is carrying on business is a question of fact and depends on the circumstances. Section 21 (3) of the Corps Act provides that a body corporate does not carry on business in Australia merely because it: (a)       is or becomes a party to a proceeding or effects settlement of a proceeding or of a claim or dispute; or (b)     holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs; or (c)      maintains a bank account; or (d)     effects a sale through an independent contractor; or (e)      solicits or procures an order that becomes a binding contract only if the order is accepted outside Australia, or the State or Territory, as the case may be; or (f)      creates evidence of a debt, or creates a security interest in property, including PPSA retention of title property of the body; or (g)      secures or collects any of its debts or enforces its rights in regard to any securities relating to such debts; or (h)     conducts an isolated transaction that is completed within a period of 31 days, not being one of a number of similar transactions repeated from time to time; or (j)       invests any of its funds or holds any property. Registration requirements: The following documents must be provided to ASIC in order to register as a foreign company:
  • Certified copy of a current certificate of incorporation or registration, or a document of similar effect;
  • Certified copy of constitution;
  • List of directors containing personal details of those directors;
  • A memorandum stating the powers of any directors who are resident in Australia and members of a local board of directors;
  • Certain information and documents relating to registrable charges on property of the foreign company;
  • Notice of the registered office of the foreign company in its place of origin (if it has one) or otherwise its principal place of business; and
  • Notice of the foreign company’s registered office in Australia which complies with s.601CT of the Corps Act[1].
Australian registered office, local agent, and public officer: In addition to an Australian registered office, you will need to appoint an Australian local agent / representative[2]. The local agent is personally liable for anything the foreign company is required by law to do. You must also appoint a public officer for taxation purposes. ARBN: ASIC will issue your foreign company with an Australian Registered Body Number (ARBN). Foreign companies must ensure that their ARBN and their name (as registered with ASIC) and place of origin are shown on their public documents. Reporting: There are ongoing reporting requirements to ASIC.

Australian company as a subsidiary of your overseas business

Foreign companies often choose as an alternative to register a proprietary company (i.e. one with less than 50 shareholders) as a subsidiary of the foreign company. In this scenario it is the Australian company which carries on business and trades in Australia. The requirements are similar to registration as a foreign company in the sense that registration with ASIC is required, there must be at least one Australian director, there needs to be an Australian registered office, and there are ongoing reporting requirements with ASIC. Australian companies must maintain a company register and unless an exemption applies lodge audited financial statements each year. The company will need to separately apply for an Australian Business Number, Tax File Number, and typically register for Goods and Services Tax (assuming GST turnover exceeds $75,000) as well as Pay As You Go withholding (if the business employs employees or contractors with whom the business has entered into voluntary agreements to withhold or if the business makes payments to other businesses that don’t quote an Australian Business Number).

Other key associated considerations

(a)       Business name and trade mark search If the foreign company or Australian subsidiary company wishes to trade under a name other than its own name (as registered with ASIC) it must register it as a business name with ASIC. Whether or not the foreign company is trading under its own name or some other new name, it is important that a trade mark search is undertaken by a professional so as to minimise the risk of potential infringement of existing registered or unregistered rights in the proposed name and/or misleading or deceptive conduct under the Competition and Consumer Act 2010 (Cth).  See here for further information. (b)      Trade mark registration Trade mark registration in Australia confers a monopoly right upon the holder of the trade mark to use the mark in respect of the goods or services for which it is registered. You should ensure that your chosen name does not infringe the rights of other by commissioning a trade mark search and protect your brand by registering your trade mark in respect of your goods and services without delay.  See here for further information. (c)       FIRB approval of foreign investment Foreign investment approval may be required depending on the value of the investment, nature of the investment and the type of investor. It may be required if a foreign person (including a foreign company) acquires a substantial interest in an Australian company[3]. There are various special circumstances where approval will always be required and approval will need to be sought from the Foreign Investment Review Board particularly in relation to foreign government investors, investment in certain land, the media sector, and mining and production tenements.

Overseas businesses establishing Australian operations

We work closely with Australian Chartered Accountants and have a growing number of international clients establishing subsidiaries or branches throughout Australia and we are regularly involved in many aspects of this process on their behalf. If you are looking for assistance on how to do business in Australia, the services we and our consultants provide in this area include:

Establishing Australian operations

  • Business structure and set up
  • Asset protection
  • Expansion
  • Due diligence
  • Business valuations and negotiation of contracts
  • Banking, finance and debt funding including assistance with opening bank accounts and setting up insurance

Australian Reporting Compliance

  • Financial reporting
  • State taxes
  • Audit and reporting requirements
  • Income tax returns
  • Indirect taxes including GST and FBT
  • Corporate secretarial
  • Withholding taxes

Access to specialist knowledge

  • Transfer pricing
  • Thin capitalisation
  • Double tax agreements

Running local operations

  • Payroll
  • Outsourced bookkeeping
  • Outsourced financial controller
  • Management reporting including budgeting and cashflow management
  • Foreign exchange and transactional banking
  • Government grants

Employment services

  • Expat taxes and planning
  • Salary packaging
  • Recruitment and training
  • Appointing company directors
  • Advising on employment laws including employee entitlements
  • Employment contracts
  • Insurances

Information regarding Australian business structures

……………………………….. [1] There are specific requirements regarding opening hours for such offices. [2] Can be either a natural person or a company as long as they reside in Australia and are authorized to accept service on behalf of the foreign company. [3] See www.firb.gov.au/exemption-thresholds/monetary-thresholds/ for a useful summary

The information provided in this article is provided by way of general information only. It does not constitute legal advice, and should not be relied upon as such. Specific independent legal advice should be obtained before deciding to act, or not to act, upon the views expressed or information contained in this article.

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