Australian Stock Purchase Agreement

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Australian Stock Purchase Agreement Powered By Docstoc
					    COMPANY ACCOUNTING AND FINANCIAL STATEMENTS
Any preparation of financial accounts which are to be used for any external
use (banks, tax office, shareholders) need to comply with up to 4 regulatory
bodies. These bodies affect what minimum financial information needs
to be disclosed in the companies accounts.
1. Corporations Law
   - Governs all companies that are incorporated in Australia

2. Accounting Standards
    - They contain detail guidance on all account matters, covering both
    practical and disclosure.
3. Australian Stock Exchange (ASX) Listing Rules
   - Any listed company needs to also submit regular financial statements with the
   ASX.

4. International Financial Reporting Standards (IFRS)
   - As from 1st July 2006 Australian Securities and Investments Commission (ASIC)
   requires all listed companies to comply with these standards
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AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
                      (ASIC)

The federal government appoints between 3 and 8 ASIC members
whose function is to:-

a. Administer all matters relating to companies
b. Investigate any companies suspected of non-compliance
c. Formulation and issuing of any new accounting or compliance
   regulations.
d. Refer any matters to other statutory bodies where needed.




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       AUSTRALIAN STOCK EXCHANGE (ASX)

Provides the market for sale and purchase of securities.

It has a responsibility to monitor companies and the information
about them.

It has its own set of rules and regulations regarding share trading,
company reporting and administration.

These rulings compliment or are additional to Corporation Law.




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AUSTRALIAN ACCOUNTING STANDARDS BOARD – (AASB)

The function of the Board is to:-

a) Develop a framework for the purpose of evaluating
   accounting standards.
b) Make accounting standards for the purpose of Corporation Law and other
   required purposes.
c) Participate in the development of a set of universal accounting standards

INTERNATIONAL ACCOUNTING STANDARDS BOARD (formerly known as the
   International Accounting Standards Committee)

The board is responsible for the issuing of the IFRS which was introduced in
Australia in July 2006 - all reporting companies must disclose/report under the
new required for financial accounts prepared for the year ended June 2005.




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NON – INCORPORATED FORMS OF BUSINESS OWNERSHIP

 1.   Sole Trader                         2.       Partnership


                                 Sole Trader

  -   owned by a single person
  -   only need to register business name if different from the owners name
  -   minimal costs associated with establishing
  -   all profits/(losses) are retained by the owner
  -   the owner has an unlimited liability for any debts of the business
  -   the business is not a tax entity, but fall as part of the taxable income
      of the owner
  -   if the business has a turnover (sales) of $75,000 or more it must
      register for GST


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NON- INCORPORATED FORMS OF BUSINESS OWNERSHIP

                           Partnership

The same characteristics apply to a partnership as with a sole trader except for the
following differences:-



- business is owned by 2 or more people
- the partnership is overseen by either a partnership agreement or the
  Partnership Act.
- all profits and losses are divided between the partners
- all partners are bound by the decisions and actions of any other partner
  in the partnership.
- if there is a change in the partners, then the partnership ceases.



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              INCORPORATED COMPAN IES

• needs to be registered in accordance with Corporations Law
• owners of the business are known as shareholders
• has the same power as an individual person
    (subject to any limitations from the Corporations Law)
• the company does not cease if there is a change of ownership
• since the company is ‘an artificial person’ all the decision
 making is exercised through the company directors
• a company must also register for GST if turnover exceeds
 $75,000
• unlike a sole trader and partnership, a company is a legal tax
 entity and is required to lodge an annual tax return and pay
 any taxes due on profits earned
• a company has the advantage of carrying forward any current
 year tax losses into future income years – therefore reducing
 any future years profits                                          7
        TYPES OF COMPANIES         -         Proprietary
                                             -       Public

For either company to be eligible for registration there must be a minimum
of one member.

Proprietary

• Are limited liability companies based on share value
• Maximum 50 non-employee members
• Classified into:-

    -Small       reduced reporting requirement

                 gross operating revenue less than $10million
                 company assets less than $5million
                 company employees less than 50 at the end of the year

   - Large       if the company does not satisfy at least 2 of the above
                 requirements it will be classified as a large proprietary
                 company                                                     8
Public Company

Public companies have no restriction on membership

There a four forms of a public company

1.            No Liability (NL)

This means that the amount owing to the company by the
shareholders is no greater than the amount already paid for
the shares

The company must have NL in its name

Only mining companies can be NL

                                                              9
2.                    Guarantee

Members do not share in any of the companies profits, and if
there are any outstanding debts, if the company liquidates,
then each member pays and agreed amount.

These companies are rare , but are usually charities and non-
profit organisations.

3.     Unlimited Liability

Shareholders must pay all calls on their shares.

Each shareholder has an unlimited liability if the company cannot
  pay its debts.

These companies are also rare.                                      10
4. Limited by Shares

This is the most common form of registered companies.

Shareholders liability is limited to the unpaid amounts due on
the value of the shares acquired at the time of allotment.




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  ADVANTAGES OF CONVERSATION FROM A NON –
INCORPORATED BUISINESS TO A LIMITED COMPANY

1. The liability of the owners for any unpaid debts is limited to
  the unpaid amounts owing on the shares purchased.

2. A company does not dissolve on change of ownership.

3. A company can have a greater number of owners.

4. Income tax rate for companies is 30% compared to 46.5%
   maximum rate for individuals

5. Shares are fully transferable

6. More owners – means more capital injection
             (limited to 30 members if a Pty Ltd company)
                                                                    12
 DISADVANTAGES OF CONVERSATION FROM A NON –
 INCORPORATED BUSIINESS TO A LIMITED COMPANY

1. Cost of establishment and registration is quite expensive

  -    legal fees
  -    accounting fees
  -    ASIC lodgement and registration fees

2. The compliance to Corporations Law can be complex




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ADVANTAGES FOR CONVERTING FROM A PROPRIETARY
     TO PUBLIC COMPANY

1. Prospectuses can be issued to the public to subscribe for
  shares, debentures and unsecured notes.

2. Has the right to be listed on the ASX, if it meet the ASX
   requirements

3. Publicly held shares are easily transferable

4. ITAA does not compel the company to distribute dividends to its
   shareholders, but the companies constitution may.




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  DISADVANTAGES FOR CONVERTING FROM A
      PROPRIETARY TO PUBLIC COMPANY

1. As the owners of the proprietary company are smaller, there is
   greater control/closeness between the owners and the directors,
   this relationship is lost in a public company.




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         PROCEDURES FOR INCORPORATION

1. Register the Business

• Obtain an ABN and register business name with ATO
• Ensure that the name complies with Corporation Law
                ie Pty Ltd or Ltd

2. Adopt the Replacement Rules or prepare a Constitution

• These are the rules, regulations, procedures for the company, covering every
  matter of business.

3. Allot shares to founding members

• The subscriber shareholders will need to determine the number and value of
  each share they will be take in the new company



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         PROCEDURES FOR INCORPORATION
4. Appoint director(s) and secretary


• A Proprietary company only requires 1 director
• A Public company requires minimum of 3 directors and 1 secretary


5. Completion and lodgement of application form for company registration
• lodge form with ASIC


6. Certificate of Registration
• upon the successful application to register, the ASIC will issue the new company
  with a Certificate of Registration.
• The date of registration is used as the date of first share issue

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COMPANY STATUTORY RECORDS AND REGISTERS


1. Register of Members

2. Register of Charges

3. Register of Debenture Holders

4. Register of Option Holders

5. Minutes of general meeting and directors meetings

6. Accounting Records


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COSTS ASSOCIATED WITH ESTABLISHING A COMPANY

The formation (set-up, establishment or preliminary) costs
of establishing a company are extensive.

These costs need to be accounted for separately in the
companies financials.

The 2 alternative treatments are:-

 a) costs are treat as an expense in the period they occurred
 b) costs are capitalised and written off over a period of time
       (usually 5 years)



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COSTS ASSOCIATED WITH ESTABLISHING A COMPANY
The general ledger journal entry is as follows:
Alternative a) Cost of establishment (expense)         DR
                 Bank Account                       CR


           b)    Cost of establishment (asset)    DR
                 Bank Account                      CR


Establishment costs are posted net of GST, with the GST input tax
credit portion being posted to the Input Tax Credit Account. The
gross amount is posted to the bank account.

                COMPLETE Questions 1.1, 1.6 and 1.7             20

				
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