Section 150 Licence: Think you have a Section 150 licence allowing you to omit the word “Limited” from your name? Think again…

September, 2013

Section 150 licences that were issued after 1998 now have no legal basis. The Australian Securities and Investments Commission (ASIC) is unable to provide any advice on what to do with them, so our advice is that you relegate them to the very bottom of a filing cabinet or perhaps frame them for the sake of posterity.

Previously, companies pursuing charitable purposes applied for and held “section 150 licences” entitling them to be registered with ASIC as a company limited by guarantee without the word “Limited” in their names.
Now, amongst other things, a company must be a charity registered with the Australian Charities and Not-for-Profit Commission (ACNC) and then the word “Limited” can be automatically dropped.

So in practical terms, this means that any company holding a section 150 licence which is not registered as a charity with the ACNC, or does not hold a licence that was in force prior to 1 July 1998, must reinstate the word “Limited” into its name.

The main difficulty with this new system is that it is cumbersome for new charities. When a new company becomes incorporated as a public company limited by guarantee, it must have the word “Limited” in its name, and therefore also in its constitution. It must then apply to the ACNC to be registered as a charity before being entitled to drop the word “Limited”. We believe that if it wishes to then drop the word “Limited” from its name, the new charity must apply to ASIC using a Form 432 and pay a $357 fee before it is able to drop the word “Limited” from its legal name. The charity can change its constitution to remove the word “Limited” without passing a special resolution. The charity must then notify the ACNC of the change in its name and constitution using a Form 3B.

We have paraphrased the old and the new section 150 of the Corporations Act 2001 (Cth) below:

Old Law New Law
A company could apply for a licence to drop the word “Limited” from its name if the company’s constitution:-    required the company to pursue charitable purposes only and to apply its income in promoting those purposes;

–    prohibited the company from making distributions to its members and paying fees to its directors; and

–    required the directors to approve all other payments the company made to directors.

 

 A company is not required to have the word “Limited” at the end of its name if the company:-    is a registered charity (i.e., it is registered with the ACNC); and

–    the company’s constitution:

  • prohibits the company from paying fees to its directors; and
  • requires the directors to approve all other payments the company makes to directors.

A company that, in accordance with the section above, does not have “Limited” at the end of its name must notify ASIC as soon as practicable if the company ceases to be registered with the ACNC; or the relevant parts of its constitution are changed.

If a company has the word “Limited” on the end of its name but it is not required to because it satisfies the conditions above, then the company can omit the word “Limited” anywhere that the name of the company is required to be used.

 

 

 

 

 

 

 

 

 

 

 

 

 

Essentially, a company should only omit the word “Limited” from its name in the following two circumstances:

1.    Where the company is a charity registered with the ACNC and its constitution prohibits payment of any fees to directors and payment of any other money to directors without board approval.

2.    Where the company holds a pre-existing licence that allowed the company to omit “Limited” from its name which was in force immediately before 1 July 1998 and has remained in force. The company must not have:

(a)     breached a condition of the licence;
(b)     pursued objects or purposes that would have prevented it being granted the licence;
(c)     applied its profits or other income to promote objects or purposes that would have prevented it being granted the licence;
(d)     paid a dividend to its members;
(e)     modified its constitution to allow it to do anything set out in paragraphs (a) to (d); or
(f)     failed to notify ASIC of changes to the licence or to its constitution where it was required to do so.

If your company falls into the circumstance at (1) above, then it may drop the word “Limited” (subject to formally notifying ASIC through form 432 and notifying the ACNC). This means that it can drop the word “Limited” anywhere that the name of the company is required to be used, including on all legal documents and on the ACNC and Australian Companies Registers.

Where a company previously held a licence in accordance with section 150 of the Corporations Act and now does not fit into one of the two circumstances listed above, it must notify ASIC of non-compliance with section 150 requirements by submitting a “Form 433” to ASIC.

The law does not include transitional provisions explaining what companies should do where they previously held section 150 licences, but they now do not fit into one of the two circumstances listed above. This is because the relevant law has not been revoked, it has simply been changed. The eligibility criteria has changed and so companies must notify ASIC if they no longer satisfy that eligibility criteria. There appears to be no additional requirement for companies to revoke their section 150 licences.

Contact Mills Oakley

For more information, please contact:

vera-visevic-mills-oakley

Vera Visevic | Partner
T: +61 2 8289 5812
E: vvisevic@millsoakley.com.au

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