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Main laws

Commonwealth Act

Corporations Act 2001

The Corporations Act is the main law for Australian companies. It covers company registration, directors, shareholders, company records,...

In forceCommonwealthPlain-English guide4 practical checks

Plain-English explainers, not legal advice. Check the linked official source before you rely on a specific section, and get advice for your situation.

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Quick read

  • For startups and SMEs, the Act is most practical when setting up a company, issuing shares, appointing directors, managing shareholder rights, raising capital or keeping company...
  • A business-oriented page should focus on those operating moments rather than every corporate law detail.

Likely relevant if

  • Companies registered with ASIC
  • Founders, directors and shareholders
  • Startups issuing shares or raising capital

Check first

  • Keep company records and ASIC details current.
  • Understand director duties before making major business decisions.
  • Document share issues, transfers and shareholder arrangements properly.

What the Corporations Act controls

The Corporations Act is the rulebook for Australian companies. It covers how companies are registered, how directors and shareholders make decisions, how shares are issued and transferred, how company records are kept, how capital is raised, and what happens when a company is in financial trouble.

For most SMEs, the Act matters in a handful of practical moments: setting up the company, bringing on a co-founder, issuing shares, raising money, appointing a director, keeping ASIC records current, and making hard decisions when cash is tight.

Director duties, without the fog

Directors are responsible for managing the company. In small proprietary companies, that usually means the directors are also the people running the business day to day, signing contracts, hiring staff and approving spend.

The core duties are not abstract. They ask a practical question: are you making decisions carefully, honestly, for the company's benefit, and with a real understanding of the company's finances?

Key points

  • Act in good faith and in the best interests of the company.
  • Use reasonable care and diligence when making decisions.
  • Use your position and company information properly.
  • Disclose and manage conflicts of interest.
  • Keep proper records and stay across the company's financial position.
  • Do not let the company incur debts when it is insolvent.

The boring records are the ones that save you later

The Act and ASIC system assume the company has a reliable paper trail. For a small business, that does not need to be fancy, but it does need to be accurate. The mess usually shows up later when you raise capital, sell the business, resolve a founder dispute or respond to an investor's due diligence list.

RecordWhy it matters
Share registerShows who owns shares, what class they hold, and when shares were issued or transferred.
Board and shareholder resolutionsProves major decisions were approved properly.
ASIC company detailsKeeps directors, addresses and share details aligned with the public register.
Financial recordsHelps directors monitor solvency and explain company transactions.
Constitution and shareholders agreementSets the rules for decisions, transfers, exits, disputes and investor rights.

Founders, shares and shareholder agreements

The Corporations Act sets the legal machinery for shares, meetings and company decisions. But most founder problems are not solved by the Act alone. They need a shareholders agreement that says what happens if someone leaves, stops contributing, wants to sell, needs to fundraise, or disagrees with a major decision.

Key points

  • Use vesting if shares are tied to a founder staying and contributing.
  • Document share issues and transfers before the cap table becomes messy.
  • Set decision thresholds for major matters like fundraising, hiring senior staff, taking debt or selling IP.
  • Plan exits early, including bad leaver, good leaver, drag-along and tag-along mechanics.

Raising money: do not treat shares like a handshake

Issuing shares or convertible notes is not just a commercial deal. It can trigger fundraising, disclosure, financial product and governance issues. Many early-stage raises rely on exemptions, but you still need the documents to match what was actually offered.

  1. 1

    Confirm who is investing

    Different rules can apply depending on whether the investor is sophisticated, professional, wholesale, existing, or a small-scale private investor.

  2. 2

    Document the offer

    Use a term sheet, subscription agreement, shareholders agreement updates and clean board/shareholder approvals.

  3. 3

    Update the cap table and registers

    Record the issue correctly, update company records, and lodge ASIC changes where required.

  4. 4

    Check downstream promises

    Avoid casual statements about guaranteed returns, future exits, valuations or rights that are not in the documents.

When cash is tight, director duties get sharper

When a company is growing, directors often focus on customers and product. When the company is under pressure, the legal focus shifts to solvency, creditors and whether new debts should be incurred. This is where getting advice early matters.

Key points

  • Keep up-to-date cashflow forecasts and debt records.
  • Do not ignore tax, superannuation, payroll or supplier arrears.
  • Record board decisions about funding, restructuring and creditor negotiations.
  • Get insolvency or restructuring advice before taking on new debt if the company may not be able to pay.

Key takeaways

  • The Corporations Act turns founder admin into legal obligations once you operate through a company.
  • Good company records are a growth asset, not just compliance hygiene.
  • Director duties become most important when money is tight or people are in conflict.

Plain-English glossary

Director duties
Core duties to act in good faith and in the company's best interests, with care and diligence, and to avoid improper use of position or information.
Insolvent trading
Incurring debts when the company is unable to pay them as they fall due; directors can be personally liable.
Replaceable rules
Default governance rules in the Act that apply unless replaced by a company constitution.

Common questions

What are my duties as a director?

To act in good faith and in the company's best interests, with reasonable care and diligence, to avoid conflicts and improper use of position, and to prevent insolvent trading.

Do I need a shareholders agreement if I have a constitution?

They do different jobs. A constitution sets company-level governance; a shareholders agreement governs the relationship between owners - funding, exits, decisions and disputes.

What if the company can't pay its debts?

Stop and take advice. Directors who allow the company to incur further debts while insolvent can be personally liable, so early restructuring or formal advice is critical.

Related topics

Companies & StartupsInsolvency & Restructuring

How Sprintlaw can help

Company RegistrationShareholders Agreement

Update history

Reviewed2021 statutory rule

Corporations (Ancillary Provisions) Regulations 2021 history added

Victorian Legislation records the Corporations (Ancillary Provisions) Regulations 2021 as statutory rule 80 of 2021.

Amendment15 Dec 2020

Small-business insolvency reform history added

The 2020 Act introduced small business restructuring, simplified liquidation and electronic handling of external administration documents.

Amendment29 Feb 2016

Insolvency practice reform history added

The 2016 Act reworked insolvency practitioner regulation and practice through Insolvency Practice Schedule reforms.

Reviewed2011 statutory rule

Corporations (Ancillary Provisions) Regulations 2011 history added

Victorian Legislation records the Corporations (Ancillary Provisions) Regulations 2011 as statutory rule 34 of 2011.

Reviewed29 June 2001

Corporations (Northern Territory Request) Act 2001 history added

Northern Territory Legislation records the Corporations (Northern Territory Request) Act 2001 as Act 18, assented on 29 June 2001.

Reviewed2001 statutory rule

Corporations (Ancillary Provisions) Regulations 2001 history added

Victorian Legislation records the Corporations (Ancillary Provisions) Regulations 2001 as statutory rule 63 of 2001.

Reviewed2001 Act

Corporations (Administrative Actions) Act 2001 history added

Victorian Legislation records the Corporations (Administrative Actions) Act 2001 as Act 42 of 2001 in the as-made collection.

Reviewed2001 Act

Corporations (Ancillary Provisions) Act 2001 history added

Victorian Legislation records the Corporations (Ancillary Provisions) Act 2001 as Act 43 of 2001 in the as-made collection.

Reviewed2001 Act

Corporations (Commonwealth Powers) Act 2001 history added

Victorian Legislation records the Corporations (Commonwealth Powers) Act 2001 as Act 6 of 2001 in the as-made collection.

Reviewed2001 Act

Corporations Reform (Northern Territory) Act 2001 history added

Northern Territory Legislation records the Corporations Reform (Northern Territory) Act 2001 as Act 19, assented on 29 June 2001.

Reviewed1 Jan 1991

Corporations (Northern Territory) Act 1990 history added

Northern Territory Legislation records the Corporations (Northern Territory) Act 1990 as Act 56, commencing on 1 January 1991.

Reviewed1990 Act

Corporations (Victoria) Act 1990 history added

Victorian Legislation lists the Corporations (Victoria) Act 1990 as an in-force Act with current version metadata.