Foreign Corporations (Application of Laws) Act 1989

The Foreign Corporations (Application of Laws) Act 1989 is a Commonwealth law about cross-border company law questions. It does not create a broad licensing regime, filing system or conduct code for foreign companies. Instead, it tells Australian courts and others applying Australian law which legal system should answer certain questions about a corporation incorporated outside Australia.

The practical effect is that if an issue under Australian law turns on the incorporation, status or internal affairs of a foreign corporation, the answer will often be found by looking to the law applied in the place where that corporation was incorporated. The Act also contains a rule about whether certain acts of foreign states affecting a foreign corporation, its assets or dealings are to be recognised under Australian law.

The Act defines a foreign corporation as a body or person incorporated in a place outside Australia. It also says that a place means a place that, in practice, applies a separate system of law. The definition of body is broad and includes an association, entity or society.

The Act is not confined to one type of overseas company structure. If the entity is incorporated outside Australia, the Act may be relevant when an Australian law question depends on that entity’s incorporation, status or internal affairs. The Act also defines officer broadly, including a director, secretary, executive officer, agent or employee of the foreign corporation.

Australian law is also defined broadly. It includes a law in force throughout Australia or in part of Australia, and includes the principles and rules of the common law and equity as so in force. Australian court means a federal court or a court of a State or Territory. Australia includes all the external Territories.

The key trigger is not simply that a foreign company is involved. The Act becomes relevant where a question arises under Australian law and it is necessary to determine that question by reference to a system of law other than Australian law. Section 7 says this expressly, and it also makes clear that the rule applies to questions arising in Australian court proceedings as well as more generally to questions arising under Australian law.

That means the Act can matter in litigation, but it can also matter earlier in due diligence, transaction planning, legal advice and dispute assessment. If an Australian law question cannot be answered without deciding a specified issue about an overseas incorporated entity, the Act tells you which legal system to use for that issue.

The first category is whether a body or person has been validly incorporated in a place outside Australia. The second category is a list of questions about a foreign corporation itself, including its status, membership, officers, internal management and certain internal dealings. If the issue falls into one of those categories, the law applied in the place of incorporation becomes the reference point.

Section 7 is the centre of the Act. It says that whether a body or person has been validly incorporated in a place outside Australia is to be determined by reference to the law applied by the people in that place.

It then says that a range of questions about a foreign corporation are to be determined by reference to the law applied by the people in the place where the foreign corporation was incorporated. These are not minor technical points. They go to the legal existence and internal operation of the overseas entity.

The listed questions include the corporation’s status, including its identity as a legal entity and its legal capacity and powers. They also include its membership, its shareholders if it has share capital, its officers, the rights and liabilities of members, officers and shareholders in relation to the corporation, the existence, nature or extent of any other interest in the corporation, its internal management and proceedings, and the validity of its dealings otherwise than with outsiders.

The Act also says that a matter mentioned in subsection 7(2) or 7(3) is not to be taken, by implication, to limit any other matter mentioned in those subsections. In practical terms, the listed matters should be read as distinct categories rather than as narrowing each other by implication.

Although the Act is not a compliance code in the usual sense, it creates a practical discipline for anyone applying Australian law to these questions. You cannot simply assume Australian company law answers an internal governance issue for an overseas incorporated entity. If the issue falls within section 7, the correct legal reference point is the law applied in the place of incorporation.

For businesses, that means place of incorporation should be treated as a core legal fact. If a deal depends on a foreign company’s authority, ownership, governance or internal approvals, you may need evidence of foreign law, constitutional documents, registers, resolutions or advice from lawyers qualified in the relevant jurisdiction.

This often comes up in investment rounds, shareholder arrangements, acquisitions, secured lending, major supply contracts and disputes over who controls an overseas company. A common mistake is to rely only on Australian-style assumptions about directors, secretaries, board approvals or share issues. The Act points away from those assumptions and back to the law applied in the place of incorporation.

Section 8 deals with a narrower but important issue.

If an act of a foreign state, or an entity of a foreign state, purports to affect a foreign corporation or its assets or dealings, and that act is based on, or derives from, the assertion of sovereignty or other authority over the place where the foreign corporation was incorporated, the act is not to be recognised, or in any way given effect to, under Australian law unless it is recognised, and would be given effect to, under the law applied by the people in the place of incorporation.

Section 9 adds that the application of the Act is not to be affected by Australia’s recognition or non-recognition of a foreign state or place, the government of a foreign state or place, whether a place forms part of a foreign state, or entities created, organised or operating under the law applied by the people in a foreign state or place. It also says the application of the Act is not to be affected by the presence or absence of diplomatic relations between Australia and any foreign state or place.

For businesses, this is a specialised area. It may become relevant where state action overseas is said to have changed control of a company, affected its assets, or altered its dealings. The Act’s method remains focused on the law applied in the place of incorporation, rather than on Australia’s diplomatic recognition settings.

It is important not to read this Act too broadly. The Act does not say that every issue involving a foreign corporation is governed by foreign law. Its function is narrower. It directs attention to the law applied in the place of incorporation for specified questions about incorporation, status and internal affairs.

It also does not create a general registration process, annual reporting regime, tax code, employment standard, consumer law rule or director duties framework for foreign companies operating in Australia. Those matters may be governed by other Australian laws, but they are not created by this Act.

That means a business still needs to analyse other legal issues separately. The governing law of a contract, Australian statutory obligations, local court procedure, tax treatment, employment obligations and regulatory approvals may all be controlled by other rules. This Act does not displace those laws merely because a foreign corporation is involved.

The Act commenced on the day it received the Royal Assent, which was 29 December 1989. The legislation text used for this page is Compilation No. 1, dated 1 July 2016, registered on 14 July 2016, and includes amendments up to Act No. 59 of 2015.

The Act applies both within and outside Australia, extends to each of the external Territories, and binds the Crown in right of the Commonwealth, each of the States, the Australian Capital Territory and the Northern Territory.

Before relying on this page for a current transaction or dispute, check the latest version on the Federal Register of Legislation to confirm whether there have been later amendments or related developments.

This page is based on the Federal Register of Legislation compilation of the Foreign Corporations (Application of Laws) Act 1989 showing the law as amended and in force on 1 July 2016. The operative provisions summarised here are sections 1 to 9, including the definitions, extraterritorial operation, extension to external Territories, Crown binding provision, the place-of-incorporation rule in section 7, and the recognition provisions in sections 8 and 9.

No court decisions are summarised on this page. If you need to apply the Act to a live dispute, transaction or governance issue, you should also consider whether later case law or later legislative changes affect the position.