Deferred timetable for stamp duty abolition
In the most recent budget, the NSW Government announced that it was deferring the abolition of stamp duty on (1) the transfer of business assets other than land and (2) the transfer of unquoted marketable securities to 1 July 2013.
While this announcement may disappoint anyone looking to acquire a business, it is not the first time the NSW Government has changed the timetable for abolishing stamp duty. In 2006, it was ‘brought forward’ to 1 July 2011. In 2008 it was ‘pushed back’ to 1 July 2012. Now, it has been ‘pushed back’ again to 1 July 2013.
If you have been making your plans or preparing your budget around the abolition of this stamp duty on 1 July 2012, you may need to revisit those plans and revise your budget. Stamp duty is here to stay – for now (and who knows how long in the future).
We have previously written about Shareholder’s Agreementsand what they are. A Shareholder’s Agreement is certainly very important as it deals what each shareholder brings to the table, and more importantly, what happens when there is a disagreement or if a shareholder wants to exit the business. Not having a Shareholder’s Agreement will likely make the exit process more difficult. However what a Shareholder’s Agreement cannot do is to determine how the company is run, who has the day to day responsibilities, who the directors are, and the conduct of board meetings. These are all matters dictated by the Company Constitution.
The Constitution has the effect of an agreement between the company, its members, its directors, and its secretary. A company adopts a Constitution on registration or after registration. If no particular Constitution has been adopted after registration, a default set of rules called the Replacable Rules. These rules are found in the Corporations Act and they deal with a number of topics including:
- Company Officers and Employees
- Meetings of Directors
- Powers of Directors
- Voting, Resolutions, and Quorums.
- Meetings of Members
- Transmissions of Shares on Death or Bankrupcy
A Company can replace some of the Replacable Rules with its own rules or adopt its own Constitution so long as a special resolution has been passed by its Shareholders. If a member is not satisfied with the way the company is being run, and if the company is being run in contravention of its own Constitution, they may be able to bring legal action against the offending member.
A well-run business involving more than one partner should always have both a Shareholder’s Agreement and a Company Constitution.