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Are you carrying on business in Australia?

A foreign entity which conducts business in Australia must be registered to do so.Whether a foreign entity’s activities constitute the carrying on of business in Australia depends on a variety of factors.
ASIC registration
A foreign company cannot carry on business in Australia unless it is registered with the Australian Securities and Investments Commission (ASIC), or has applied to be registered and the application has not yet been dealt with. We can advise as to whether circumstances or activities may give rise to carrying on business in Australia and assist with registration.
The Corporations Act
A body corporate carries on business in Australia under the Corporations Act 2001 (Cth) (Corporations Act) if it:

  • has a place of business in Australia (such as a permanent offce);
  • establishes or uses a share transfer offce or share registration offce in Australia; or administers, manages or otherwise deals with property
  • situated in Australia as an agent, legal personal representative or trustee, whether by employees or agents or otherwise. This is potentially a very broad deeming provision.

Also, a foreign company that makes an offer of debentures in Australia that requires compliance with the Corporations Act’s debenture trust requirements (principally retail offers), or acts as guarantor for an offer, is taken to carry on business in Australia.

Expanded classifcation
Foreign companies include bodies corporate and some unincorporated bodies. An unincorporated body formed outside Australia is a foreign company if it may sue or be sued, or may hold property in the name of its secretary or an offcer of the body duly appointed for that purpose. Some foreign limited partnerships and other business structures may be classifed as bodies corporate.
General law also applies
Under general law, whether a person is carrying on business in Australia is a question of fact, often importing notions of system, repetition and continuity. A company may be carrying on business in Australia even if it does not have a fxed place of business in this jurisdiction. Further, traditionally, there is a need for some physical activity in Australia through human instrumentalities (such as business visits), being activity that itself forms part of the course of conducting business.System, repetition and continuity of activities in a particular jurisdiction may not be essential to constitute carrying on a business in Australia. A one-off event in a jurisdiction has been held to be enough to constitute carrying on business in that jurisdiction, particularly where that event is part of a business carried on elsewhere, there is an intention to engage in further activities in that jurisdiction or it is of signifcant scale. It has also been held that carrying out an activity 5 or 6 times is enough to constitute carrying on a business.Other activities which may result in a foreign entity carrying on business in Australia include:

  • having a representative in Australia who has authority to bind the foreign entity;
  • appointing a representative (such as an agent) in Australia whose activities would be regarded as forming part of the activities of the foreign entity rather than merely of the representative, or whose activities go beyond merely ‘ministerial’ matters;
  • exercising a signifcant degree of control over the activities of any agent or other representative in Australia;
  • developing a signifcant client base in Australia;
  • conducting a series of regular or continuous dealings in Australia;
  • paying or contributing to the costs of running an offce in Australia or the offce of an agent or representative in Australia;
  • employing staff in Australia, or paying or contributing to the salaries of staff employed in Australia by an agent or representative; or
  • locating or using business infrastructure in Australia (e.g. IT servers).

Importantly, the overall likelihood of carrying on business in Australia increases if any of these activities are undertaken in combination. Traditionally, the Australian Courts have tended to focus on activities that physically occur in Australia in analysing whether a foreign company carries on business in Australia, including the activities of agents in Australia or third parties in Australia that are considered to be carrying on the business of the foreign company. There are, however, a number of recent decisions by the Courts that suggest a broader approach. This broader approach involves giving signifcant weight to all the points of connection that a cross-border business may have with Australia. Examples of such points of connection include incurring signifcant business expenses in Australia, engaging suppliers or distributors in Australia, earning signifcant revenue from Australian customers, and operating a website outside Australia that targets the Australian market.

If this approach of “connectivity” continues to be adopted by the Courts in the future, it may signifcantly increase the circumstances in which a foreign company conducting business into Australia on a remote cross-border basis is held to be carrying on business in Australia. The extent to which this broader approach will be adopted in the context of the Corporations Act is not, however, clear.

The Corporations Act
A body corporate does not carry on business in Australia merely because it:

  • is or becomes a party to a proceeding or effects settlement of a proceeding or of a claim or dispute in Australia;
  • holds meetings of its directors or shareholders or carries on other activities concerning its internal affairs in Australia;
  • maintains a bank account in Australia;
  • effects a sale through an independent contractor in Australia;
  • solicits or procures an order that becomes a binding contract only if the order is accepted outside of Australia;
  • creates evidence of a debt, or creates a charge on property in Australia;
  • secures or collects any of its debts or enforces its rights in regard to any securities relating to such debts in Australia;
  • conducts an isolated transaction in Australia that is completed within a period of 31 days and is not repeated from time to time; or
  • invests any of its funds or holds any property in Australia.

However, engaging in these activities in combination may give rise to carrying on business in Australia.

Are you carrying on a financial services business?

In Australia, if you carry on a fnancial services business, you need:

  • to hold an Australian fnancial services licence (AFSL);
  • to be appointed as an authorised representative; or
  • to be exempt from the requirement to hold an AFSL (under Chapter 7 of the Corporations Act).

Generally, lenders are not covered by this licensing system (see Consumer Credit regarding licensing for providers of credit), but most other types of fnancial services are covered (including deposit taking, foreign exchange contracts, derivatives, custody, managed investments, stockbroking, insurance and superannuation). This also includes wholesale over-the-counter treasury and derivative trading, potentially even by entities which would consider themselves end-users.

Under the Australian legislation:

  • a fnancial services provider may be deemed to carry on a fnancial services business in Australia even though it has no physical presence in Australia; and
  • while there are some general licensing exemptions based on a fnancial services provider only dealing with institutional Australian counterparties (e.g. Australian banks, financial services licence holders, insurers and fund managers), such exemptions will generally only apply to services provided from outside of Australia.
When do you need an AFSL?
A foreign company may be affected by the AFSL regime if it:

  • enters into spot, swap, repo, option or forward transactions in currency, commodities, metals, rates and indexes with persons in Australia through either the over-the-counter markets or through automated dealing systems;
  • issues securities, shares, stocks, deposits, debentures, bonds, managed investment products or insurance to persons in Australia;
  • effects secondary market trades in securities, shares, stocks, debentures, bonds or managed investment products as an agent or trustee of a person in Australia;
  • enters into secondary market trades in securities, shares, stocks, debentures, bonds or managed investment products with counterparties who are persons in Australia while acting as an agent or trustee of a third person;
  • provides giro post or other electronic non-cash payment facilities to persons in Australia; or
  • holds securities, shares, stocks, debentures, bonds, managed investment products, or interests in such products, on trust for persons in Australia.
Do AFSL exemptions apply?
AFSL exemptions may be available to foreign fnancial services providers in certain situations, including for:

  • transactions arranged or effected by an Australian financial services licensee;
  • certain products or services offered to Australian wholesale clients by fnancial services providers who are regulated by certain approved foreign regulators, and who comply with other applicable conditions so as to qualify for this relief;
  • certain foreign fnancial services providers who are not otherwise carrying on business in Australia and who only provide limited fnancial services to Australian wholesale or professional investor clients from outside Australia; and
  • supplementary services to an Australian client in relation to a product issued and acquired outside Australia.

The exact scope of these exemptions is technical and complex. Much depends on the individual circumstances of the relevant fnancial services provider.

AFSL regime
AFSLs are issued by ASIC on satisfaction of the relevant licensing application criteria. Licence applications can require extensive proofs in support of the application. AFSL holders have a large range of obligations imposed on them. The Australian fnancial services regime differentiates between retail and wholesale clients. There are signifcant additional disclosure and conduct requirements where financial services are provided to retail clients. Breaches of the AFSL regime can lead to criminal sanctions and the possibility that counterparties can rescind transactions.

Are you operating a financial market?

Persons who operate fnancial markets in Australia must obtain an Australian market licence or be exempt from this requirement. In certain circumstances, the market licensing regime may affect foreign companies that operate markets in fnancial products in which Australian persons are participants.


Key contact
   Berkeley Cox : Chief Executive Partner,  Australia
                          berkeley.cox@au.kwm.com
Michael Barker : Managing Partner, M&A , Australia
                          michael.barker@au.kwm.com
       Evie Bruce : Managing Partner, Banking & Finance and Projects & Real Estate
                          evie.bruce@au.kwm.com
   Renae Lattey : Managing Partner, Clients , Australia
                          renae.lattey@au.kwm.com
    Peter Pether : Managing Partner, Dispute Resolution and Taxation
                          peter.pether@au.kwm.com
Justin Cherrington : Head of Tax,  Australia
                          justin.cherrington@au.kwm.com