A public stock company is considered by law to be an entity with legal rights and obligations

Buying shares and investing in a company can be an exciting time. Whether you are buying shares to start an investment portfolio, build your wealth or possibly have another income stream, it is important to understand your role as a shareholder. As experts in dispute resolution, Slater and Gordon has seen the confusion and frustration that can be caused when shareholders misunderstand their rights and obligations.

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Set up a registered office, place of business and directors
Create and maintain your business name
Update ASIC on key changes
Keep financial records
Pay fees to ASIC
Check annual statements
Get professional advice if you need it
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A shareholder is a part owner of a company. All companies must have at least one shareholder.

You become a shareholder in a company if:

the company issues shares to you; or
an existing shareholder in the company transfers their shares to you (usually for a price) and the company registers the share transfer.

Your rights as a shareholder will depend on the type of company you hold shares in (public or private) and what class of shares you hold (ordinary or preference shares). Shareholders’ rights will also depend upon the company’s constitution (if it has one), the ‘replaceable rules’ set out in the Corporations Act 2001 (Cth) and any executed shareholder agreements.

Generally, shareholders enjoy the following rights:

Right to attend shareholder meetings and vote on certain issues (e.g. appointment and removal of directors)
Right to sell your shares (there may be restrictions imposed)
Right to participate in corporate actions offered by the company (such as rights and share issues or share buybacks)

Because a company is a separate legal entity, shareholders’ duties are generally limited to any unpaid amounts on shares held by that shareholder. Any other obligations will be specifically provided for in the company’s constitution and/or a shareholder agreement.

The major differences between shareholders and directors are:

Shareholders are part-owners of a company, whereas directors are responsible for the management of the company’s business activities
Shareholders’ duties are generally limited to any unpaid amounts on shares they hold, whereas directors have range of duties under federal, state and territory law

Although it is common for people to buy shares, it is important to take note of the common pitfalls we have seen:

The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.

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A shareholder is a part owner of a company. All companies must have at least one shareholder.

You become a shareholder in a company if:

the company issues shares to you; or
an existing shareholder in the company transfers their shares to you (usually for a price) and the company registers the share transfer.

Generally, shareholders enjoy the following rights:

Right to attend shareholder meetings and vote on certain issues (e.g. appointment and removal of directors)
Right to sell your shares (there may be restrictions imposed)
Right to participate in corporate actions offered by the company (such as rights and share issues or share buybacks)

The major differences between shareholders and directors are:

Shareholders are part-owners of a company, whereas directors are responsible for the management of the company’s business activities
Shareholders’ duties are generally limited to any unpaid amounts on shares they hold, whereas directors have range of duties under federal, state and territory law

Although it is common for people to buy shares, it is important to take note of the common pitfalls we have seen:

Thank you for your feedback.

New ID requirement for directors

Company directors are now required by law to apply for a director identification number (director ID). Find out more at our Director ID information page.

If you want to set up a company, you will need to complete the registration process with ASIC. You will also need to check that your company complies with its obligations under Australian law. On this page we outline your legal requirements.

Set up a registered office, place of business and directors

You will need to set up a current registered office that ASIC can use to send documents to the company. Your principal place of business will be the location from which your company operates its business.

You must also inform ASIC of the name, date of birth and current residential address of all directors of the company.

Find out more on our checklist for registering a company.

Company directors must also personally comply with obligations under Australian law. Find out more about company director obligations for small business.

Create and maintain your business name

If the company conducts business using a business name, you must ensure that the business name is registered and renewed when registration expires (every one or three years). We will send the company a business name renewal notice 30 days before the renewal is due.

Find out how to register a business name and renew and maintain your business name.

Update ASIC on key changes

You must notify ASIC of changes to the company’s registered office, principal place of business, directors and business name. You must notify ASIC within 28 days to avoid late fees.

Read more on how to update your company details with ASIC.

Keep financial records

A company must keep up-to-date financial records that correctly record and explain transactions and the company’s financial position. Larger companies have additional obligations to lodge financial reports with ASIC.

Find out more about lodging financial reports and books and records.

Pay fees to ASIC

Fees that companies must pay ASIC include company registration fees, annual review fees, lodgement fees and late fees. Find out more about ASIC fees.

Check annual statements

Each year, we will send your company an annual statement. You will need to check the details on your annual statement, update any changes with ASIC and pay the associated annual company review fee. You must also pass a solvency resolution stating that you have reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Find out more at Information Sheet 3 Annual statements (INFO 3).

Get professional advice if you need it

Make sure you get trusted professional advice if you are uncertain about your legal obligations.

There are some important questions you should consider before engaging an adviser:

Is the adviser a member of a professional body and are they subject to a code of conduct?
Are they regulated by ASIC, the Australian Taxation Office or other government agencies?
Is the adviser listed on ASIC’s banned and disqualified persons register or have they entered into an enforceable undertaking?
If I receive bad advice or suspect misconduct, can I lodge a report with a professional body or a regulator?
Do I need help to better understand my legal obligations and understand how I might be personally liable for my decisions?
Is the adviser the most suitable to assist with the problem I have? A company director may need to engage separate advisers when seeking advice about the affairs of the company and in respect of their personal affairs.

If the advice you get doesn’t appear right, or if it sounds too good to be true, get a second opinion from another adviser.

Business.gov.au has some great tips on how to find a business adviser.