Question 1

How does a sole director execute deeds and contracts under Section 127?

Accepted Answer

A sole director who is also the sole company secretary signs under s 127(1)(c) of the Corporations Act 2001. Under Section 127(1)(c) of the Corporations Act 2001 (Cth), a proprietary company without a separate secretary can execute contracts and deeds if signed by the sole director who states they sign in the capacity of sole director and sole company secretary. Following the Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2022, electronic execution and split execution are fully valid under s 110A. Statutory Reference: Corporations Act 2001 (Cth) ss 127(1)(c), 110A, 129(5)

Question 2

What happens to a company when the sole director and shareholder dies or loses capacity?

Accepted Answer

Under s 201F, the personal representative (executor) can appoint a replacement director to prevent corporate paralysis. When a sole director/shareholder dies, company operations and bank accounts are often frozen because power of attorney ceases at death. Section 201F of the Corporations Act allows the deceased director's personal legal representative (executor) to appoint a new director. However, this requires probate unless the company constitution contains pre-appointed successor director mechanisms or clear constitutional powers. Statutory Reference: Corporations Act 2001 (Cth) s 201F, s 1322

Question 3

What is a Division 7A Loan Agreement and when is it legally required?

Accepted Answer

A written s 109N agreement is required before the company tax return due date for any funds advanced from a company to shareholders. Whenever a private company makes a loan, advance, or provides financial accommodation to a shareholder or associate, the loan is deemed an unfranked assessable dividend under Division 7A of the ITAA 1936 unless a formal written loan agreement complying with Section 109N is executed before the company's lodgement day. The agreement must specify a maximum term (7 years unsecured or 25 years secured by registered mortgage) and charge the ATO benchmark interest rate. Statutory Reference: Income Tax Assessment Act 1936 (ITAA 1936) ss 109N, 109E; TD 2022/11

Question 4

What are the legal requirements to voluntarily deregister a company with ASIC?

Accepted Answer

All members must agree, assets must be under $1,000, no liabilities or ongoing litigation, and fees fully paid. Under Section 601AA of the Corporations Act 2001, a company can apply for voluntary deregistration via Form 601AA if: (a) all members agree, (b) the company is not carrying on business, (c) company assets are valued at less than $1,000, (d) the company has no outstanding liabilities, (e) the company is not party to legal proceedings, and (f) all ASIC review fees and penalties are paid in full. Statutory Reference: Corporations Act 2001 (Cth) s 601AA

Question 5

Why should an SMSF use a Special Purpose Corporate Trustee rather than individual trustees?

Accepted Answer

A special purpose corporate trustee provides limited liability, simplified succession upon death, and lower ASIC annual review fees. Under Section 19 of the Superannuation Industry (Supervision) Act 1993 (SISA) and ASIC fee schedules, a special purpose corporate trustee receives a discounted annual review fee (~$63 vs ~$321). More importantly, when members join or exit the fund (such as on death), legal title to fund assets does not need to be transferred at the land titles office or bank, eliminating substantial legal costs and administrative disruption. Statutory Reference: SISA 1993 s 19, Corporations (Review Fees) Regulations 2003

Question 6

How do ATO rulings TD 2022/11 and Section 100A impact Trust and Company structures?

Accepted Answer

Unpaid trust distributions to bucket companies are treated as Division 7A loans, requiring strict loan agreements or sub-trust management. Under TD 2022/11, the ATO withdrew its previous position in TR 2010/3 and ruled that an unpaid present entitlement (UPE) created by a trust in favour of a corporate beneficiary post-1 July 2022 constitutes 'financial accommodation' under s 109D. This means the unpaid amount automatically triggers Division 7A unless converted into a compliant 7-year or 25-year s 109N loan agreement or paid out in cash. Statutory Reference: ATO Taxation Determination TD 2022/11; ITAA 1936 s 100A, s 109D

Division 7A & TD 2022/11 Bucket Company Loan Deed Protocol

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