A company exists as a legal entity separate from its owners (the "shareholders") and those who manage the affairs of the company (the "directors"). This means that the shareholders and directors are generally not liable for the debts of the company. Exceptions to the general principle that directors are not personally liable for debts of the company, are to be found in provisions relating to insolvent trading as defined in the Corporations Act 2001 (Cth). In essence, insolvent trading involves incurring a debt at a time when there are reasonable grounds for believing that the company is no longer able, or is likely to be no longer able to pay its debts as and when they fall due.
The Australian Securities and Investments Commission (ASIC) is the regulatory body governing companies in Australia and administering the Corporations Act 2001 (Cth). ASIC's aims are, among other things, to provide protection for consumers and businesses in their dealings with companies.
Most Companies are a Private Company (also known as a Proprietary Company).
This is a company which does not sell its shares to the general public (e.g. through a stock exchange). The transfer (sale) of shares in such a company is usually restricted in some way, such as by the requirement that the directors of the company must approve any transfer of shares and that new shareholders only become members of the company on registration of the transfer of the shares to them by the company. A proprietary limited company must have a minimum of one member (shareholder) and can have up to 50 non-employee members (shareholders). The liability of the shareholders of the company is limited to the uncalled amount, if any, owing on their shares. A private company has the words "Pty Limited" or "Pty Ltd" after its name.
The accounting requirements imposed on a proprietary company depend on whether the company is classified a small or a large company. A company's classification can change from one financial year to another as its circumstances change.