Company Restructures

What is a Company Restructure?

Generally, a company undergoes a restructure if it needs to:

enhance shareholder or business value
adapt to changing market conditions or competitive pressures
attract additional equity
become a more bankable organisation
return capital to shareholders
repay a Division 7A loan from sources other than cash
tidy up its capital structure
prepare for deregistration
undertake an internal re-arrangement in a group of structures.

These objectives can be achieved in a number of ways:

Reduce issued capital

redemption
share buy back
capital reduction

Make changes to the share capital

creation of new classes
variation of rights to existing classes
conversion from one class to another
divide or consolidate its existing shares

Undertake tax effective transactions

issue shares as a result of a roll-over

Change its type, commonly

change from proprietary to public limited by shares
change from public limited by shares to proprietary
change from public limited by guarantee to proprietary or public company limited by shares
changes between a standard proprietary company and a special purpose trustee SMSF trustee company
migrate to become an incorporated association

What’s required?

Generally, you need to provide:

a company search or report
details of the end objective
the current constitution

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Company Restructures FAQs

What is the normal process for a capital reduction?
Normally, a capital reduction occurs as follows:

1. Directors meet to convene a general meeting at which they put forward the resolution approving the capital reduction.

2. The secretary issues notices of the general meeting to all shareholders. Attached to that notice must be the wording of the proposed resolution and all matters which the company believes would be relevant to adequately inform the shareholders prior to asking them to decide upon the resolution.

3. ASIC must receive a copy of the notice of general meeting, together with all papers issued to shareholders.

4. The general meeting takes place so that shareholders can vote upon the proposed capital reduction.

5. Settlement of the transaction should next take place. This normally will involve either the company drawing a cheque in favour of the participating shareholders, or the cancellation of shares, if applicable. Cancellation is not mandatory.

6. Notice of resolution and cancellation of shares (if applicable) must be sent to ASIC.

There is a set timetable to follow with this procedure. You are ‘locked into’ observing certain timeframes. All up, the procedure is usually completed within six weeks.

If you would like to do a capital reduction, simply fill in our order form and submit it to us. We’ll be happy to help.
What is the procedure for a share buy back?
A share buy back generally proceeds as follows:

1.   Directors meet to convene a general meeting at which they put forward the resolution approving the share buy back.

2.   The secretary issues notices of the general meeting to all shareholders. Attached to that notice must be the wording of the proposed resolution and all matters which the company believes would be relevant to adequately inform the shareholders prior to asking them to decide upon the resolution. Included in these attachments must be a copy of the proposed Share Sale Agreement between the company and those shareholders involved in the share buy back.

3.   ASIC must receive a copy of the notice of general meeting together with all papers issued to shareholders, including a copy of the proposed Share Sale Agreement.

4.   The general meeting takes place so that shareholders can decide upon the proposed share buy back.

5.   Settlement of the transaction should next take place, where the Share Sale Agreement and Share Transfer Form are executed. In Victoria, no stamp duty is payable on these instruments. If the company is incorporated in another state, duty may be payable.

6.   Notice of transfer and cancellation of shares to be sent to ASIC. There is a set timetable to follow this procedure. You are ‘locked into’ observing certain timeframes. All up, the procedure is usually completed within two months.

If you would like to start a share buy back, simply fill in our order form and submit it to us. We’ll be happy to help.
What types of shares can I buy back?
The ability for a company to easily buy back shares it had previously issued was introduced in 1995. As from this date, it was no longer necessary to undergo complex procedures or to re-draft the Memorandum and Articles of Association of the Company.

A company is permitted to buy back any type of share other than redeemable preference shares.

For an unlisted company, a buy back is generally either:
- Selective – whereby the treatment of shareholders differs, or
- Equal access – whereby all shareholders participate equally in the buy back scheme.
If you would like to start a share buy back, simply fill in our order form and submit it to us. We’ll be happy to help.

What is the difference between beneficially held and non-beneficially held shares?

What classes of shares do you allow for?
Nine classes of shares are provided for in all standard companies. This anticipates and prepares the company for various changes to the composition of shareholders and other changes which may arise over the life of the company, avoiding the need for (and expense of) creating the most commonly needed classes of shares in future years.

The classes are:
- ordinary shares with all normal dividend and voting entitlements. This is the class of share most commonly used in all types of companies.
- A to F class shares – these all have the same right to receive a dividend at a rate different to that paid on the ordinary shares. These shares allow for dividend streaming. Although the holders of the same class of share must receive the dividends paid at the same rate, a different rate can be paid to the holders of different classes. For example, if there is a holder of A, B and C class shares, the holder(s) of A class shares may receive a dividend of 10 cents per share; those holding B class shares may receive no dividend; and those holding C class shares may receive a dividend of 50 cents per share. Those rates can be altered for each dividend payment. These shares do not confer any entitlement to vote.
- G and H class redeemable preference shares – these generally do not confer an entitlement to vote, but do confer an entitlement to receive dividends in priority to all other shareholders. These shares can be redeemed at the Company’s option.
Other than ordinary shares, no classes are entitled to share in the surplus assets in a winding up of the company.
Who can hold shares in a company?
Any legal entity may hold shares in a company.

A legal entity can be defined as, “any person, company or incorporated association which is resident anywhere in the world.”

However, a minor under law cannot hold shares in their own name.

Beneficial holding	Non-beneficial holding
A child under the age of 18	A parent or guardian
A trust	The trustee
A superannuation fund	The trustee
A partnership	All partners or the managing partner