Document ID: chunk:federal_register_of_legislation:C2025C00185:section:1:p1
Version: federal_register_of_legislation:C2025C00185
Segment Type: section
Provision Reference: s 1 (pt 1/3)
Character Range: 398133–400797

1  What registration means

1.1 Separate legal entity that has its own powers
  As far as the law is concerned, a company has a separate legal existence that is distinct from that of its owners, managers, operators, employees and agents. A company has its own property, its own rights and its own obligations. A company's money and other assets belong to the company and must be used for the company's purposes.
  A company has the powers of an individual, including the powers to:
• own and dispose of property and other assets
• enter into contracts
• sue and be sued.
  Once a company is registered, its separate legal status, property, rights and liabilities continue until ASIC (Australian Securities and Investments Commission) deregisters the company.
[sections 119, 124—125, 601AA—601AD]

1.2 Limited liability of shareholders
  Shareholders of a company are not liable (in their capacity as shareholders) for the company's debts. As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, particularly if a shareholder is also a director, this limitation may be affected by other laws and the commercial practices discussed in 1.3 and 1.4.
[section 516]

1.3 Director's liability for company's debts
  A director of a company may be liable for debts incurred by the company at a time when the company itself is unable to pay those debts as they fall due.
  A director of a company may be liable to compensate the company for any losses the company suffers from a breach of certain of the director's duties to the company (see 5.3).
  In addition to having liability for the company's debts or to pay compensation to the company, a director may also be subject to a civil penalty.
  If a company holds property on trust, a director of the company may be liable in some circumstances for liabilities incurred by the company as trustee.
[sections 197, 344, 588G, 588J, 588M, 1317H]

1.4 Director's liability as guarantor/security over personal assets
  As a matter of commercial practice, a bank, trade creditor or anyone else providing finance or credit to a company may ask a director of the company:
• for a personal guarantee of the company's liabilities; and
• for some form of security over their house or personal assets to secure the performance by the company of its obligations.
  The director of a company may, for example, be asked by a bank to give a mortgage over their house to secure the company's repayment of a loan. If the company does not repay the loan as agreed with the bank, the director may lose the house.

1.5 Continuous existence
  A company continues