Is your foreign company compliant with ASIC? Time to reassess

Running a foreign company in Australia involves more than just registering for an Australian Business Number (ABN) – an 11-digit unique identifier required for businesses to identify themselves in dealings with the government, other businesses and the public – or meeting tax obligations with the Australian Taxation Office (ATO), the government agency responsible for administering Australia’s tax system. While many businesses ensure they comply with tax requirements such as lodging income tax returns or quarterly Business Activity Statements (BAS), one crucial regulatory requirement often gets overlooked – registration with the Australian Securities and Investments Commission (ASIC).

By Ro Elvinia

Why ASIC registration matters

ASIC is Australia’s corporate regulator, and under the Corporations Act 2001, foreign companies carrying on a business in Australia must be formally registered with ASIC. Failure to do so can result in significant penalties and operational disruptions.

Does this apply to your business?

Your foreign company may be considered as ‘carrying on a business’ in Australia if it engages in any of the following activities:

  • Making sales to Australian customers
  • Maintaining a physical office or employing staff in Australia
  • Holding significant local contracts or generating substantial revenue in Australia
  • Operating in the country for an extended period

If your company falls into any of these categories, it may be time to reassess its compliance status.

Why some foreign companies overlook ASIC registration

There are several reasons why a foreign company might not have initially registered with ASIC:

Minimal early activity
Foreign businesses often enter the Australian market with a cautious approach, conducting occasional or small-scale transactions to test the waters. In these early stages, the level of activity may not be substantial enough to trigger the legal requirement for ASIC registration. Without a clear indication that the business is operating in Australia on a larger scale, companies might not recognise the necessity of formal registration.

Gradual growth
As the business begins to expand, whether through increased transactions, hiring local staff or securing long-term contracts, the scale and nature of its operations may evolve beyond what was initially anticipated. At this point, foreign companies may find themselves needing to register with ASIC to comply with Australian corporate law. This gradual growth can sometimes lead to a delayed realisation of the registration requirement, especially if the company did not foresee such rapid development.

Regulatory complexity
Navigating Australian corporate law can be intricate, particularly for foreign businesses unfamiliar with the local regulatory environment. Companies may face uncertainty or confusion regarding their compliance obligations, leading them to underestimate the necessity of ASIC registration. The complexity of legal requirements, including the need for a resident director or local agent, can be overwhelming for those new to the Australian market.

ABN misconceptions
It is common for foreign companies to assume that obtaining an ABN is sufficient to operate in the country. While an ABN is necessary for tax purposes, it does not fulfil the legal requirements set by ASIC for conducting business in Australia. The distinction between the two is often misunderstood, leading businesses to overlook the need for ASIC registration altogether.

The risks of non-compliance

Operating in Australia without proper ASIC registration can result in severe consequences, including:

Heavy financial penalties
Failure to register with ASIC can lead to substantial financial penalties. Companies may be subject to fines as high as $15.65 million, or three times the financial benefit gained from non-compliance, whichever is greater. For individuals in positions of authority, such as directors and officers, the stakes are even higher. Serious breaches of compliance can result in personal fines of up to $1.565 million or even lengthy prison sentences of up to 15 years. These penalties not only place a financial burden on the company but also expose directors and officers to personal legal risks.

Daily compounding fines
In addition to the initial penalties, the financial consequences of non-compliance can quickly escalate. Penalties for failing to meet ASIC registration requirements can compound daily, meaning that the longer the issue remains unaddressed, the higher the fines become. This compounding effect can quickly turn a manageable issue into a major financial crisis, underscoring the importance of addressing registration requirements promptly.

Operational disruptions
Non-compliance can have serious operational repercussions. For example, any contracts entered into by a company that is not properly registered with ASIC may become unenforceable, potentially putting important business agreements at risk. Financial institutions, such as banks, may refuse to provide critical services, such as loans, credit or business banking accounts, to companies that fail to meet regulatory requirements. ASIC also has the power to deregister non-compliant companies, effectively halting their ability to operate in Australia. This could disrupt operations, damage existing partnerships and hinder further expansion efforts.

Reputational damage
Non-compliance with ASIC regulations can significantly damage a company’s reputation. ASIC is required to publish enforcement actions, and any public record of non-compliance can harm a company’s credibility in the marketplace. This negative publicity can erode trust with clients, partners and investors, potentially jeopardising long-term relationships and future business opportunities. Maintaining compliance is not only a legal obligation but also a critical component of preserving your company’s professional standing in a competitive market.

Real-world consequences

Consider the following examples of businesses that faced compliance challenges:

  • A foreign technology firm was fined $13,000 per day until it completed its ASIC registration.
  • A logistics company lost a critical client after its contracts were deemed invalid due to non-compliance.

Taking proactive steps to register eliminates these risks entirely.

Beyond compliance: the benefits of ASIC registration

Aside from meeting legal obligations, registering with ASIC can provide strategic advantages for foreign businesses:

Regulatory assurance
Registering with ASIC ensures your business is compliant with Australian corporate laws, helping you avoid penalties and legal issues.

Enhanced local presence
It establishes your business as a legitimate entity in Australia, fostering greater trust with customers, partners and stakeholders.

Greater credibility
ASIC registration demonstrates transparency and integrity, reassuring clients, suppliers and investors about your company’s professionalism.

Smoother business transactions
Being registered with ASIC simplifies interactions with Australian customers, suppliers and government agencies, making business operations more efficient.

Access to banking services
ASIC registration makes it easier to open and maintain business bank accounts in Australia, facilitating smoother financial operations.

How ABN Australia can help

At ABN Australia, we specialise in helping foreign companies navigate the ASIC registration process. While we do not provide legal advice, our experienced team can streamline the process by:

  • Conducting a free compliance check to determine if your business requires ASIC registration
  • Advising on the best business structure (foreign branch vs. local subsidiary)
  • Managing paperwork, liaising with ASIC and ensuring successful registration
  • Offering ASIC Local Agent and Registered Office Address solutions

Take the next step towards seamless compliance today. Contact ABN Australia to schedule your free compliance check and ensure your business is set up for success in Australia.

Published: 13th Feb 2025 | Last updated: 13th Feb 2025