1.1.C.220 Company - public & private
This definition applies to all payments subject to assets testing provisions.
A company is incorporated by registration under the Corporations Act. A company is a legal entity which is set up to either:
- hold investments, OR
- run a business.
The features of a company are:
- A company is owned by its shareholders.
- A company is a separate legal entity from its shareholders.
- The incorporation of a company is recorded in the Memorandum of Association, which states the:
- name of the company,
- liability of the shareholders,
- amount of share capital, and
- objectives of the company.
- The internal running of a company is regulated by the Articles of Association, which state:
- how the directors are appointed,
- the powers and duties of the directors,
- the rules on how the company is to be run, and
- voting rights of the shareholders.
- The directors are elected by the shareholders at the company's annual general meeting.
- The directors control the running of the company on behalf of the shareholders.
- The shareholders' liability for the debts of the company is limited to the nominal value of their shares.
Definition: Private company
Some features of a private company are:
- there are between one and 50 shareholders,
- approval from the director/s may be required before the shares are sold,
- shares cannot be offered for sale to the general public, and
- often the income support recipient and their partner are the only shareholders and directors of the company.
These companies are referred to in the Corporations Act as proprietary companies.
Policy reference: SS Guide 18.104.22.168 Assessable Assets from Private Companies & Unlisted Public Companies, 22.214.171.124 Treatment of Assessable Assets - Private & Unlisted Public Companies - Not Assessed Under Trusts & Companies Rules, 126.96.36.199 Assessing Shares in Public Companies, 188.8.131.52 Assessing Shares in Private & Unlisted Public Companies - Not Assessed Under Trusts & Companies Rules
Definition: Public company
A public company can offer its shares to the public. A public company may be listed on the Stock Exchange or unlisted.
Shares in public listed & unlisted companies
Shares in public listed and unlisted companies are financial assets under the Act. They are part of an income support recipient's financial assets and subject to deeming. They are NOT subject to assessment under the business income rules in the SSAct section 1075(1).
Act reference: SSAct section 1075(1) Permissible reductions of business income, section 1072 General meaning of ordinary income, section 8(1) Income test definitions, section 9(1)-'financial asset', section 9(1)-'financial investment', section 9(1)-'listed security', section 9(1)-'unlisted public security'