Formal control of a company 043-04030020

The below criteria establish whether a private company is a controlled private company with respect to an individual. The:

• sum of the direct voting interests in the company that the person and the person's associates have is 50% or more, or
• person, alone or with associates, is beneficially entitled to 15% or more of the capital or dividends of the company, or
• company is sufficiently influenced by the person, an associate of the person, or 2 or more entities covered by the above factors, or
• person (alone or with associates) can exercise control over the company

Note: where none of the above criteria is met by:

• an income support recipient, the company will not be a controlled private company with respect to that individual
• any individual in respect of a designated private company:
  • no attribution can be made to any person (whether receiving Centrelink payments or not), and
  • the asset and income assessment should default to the 'net asset backing' method of Assessment of private company assets pre 1 January 2002 and Assessing income from private companies pre 1 January 2002

A customer may be involved with a private company as a:

• shareholder
• director
• secretary or public officer or
• contributor

The most common role is that of a shareholder. The most common shares issued are ordinary shares, which convey the right to:

• participate in dividends
• participate in capital if the company is wound up
• vote at meetings of the shareholders

Other share types such as preference shares, convertible preference, cumulative preference, participating preference or redeemable preference shares usually do not carry voting rights and as such will not indicate control of the company.

Where a company has an even number of shares held equally by the two members of a couple, then control of the company would be joint or 50% each.

Governing director's shares are often classified as 'A' class shares. These usually give the holder the majority of voting share rights and, would indicate the ability to control the company.

Directors and the company secretary/public officer are appointed by shareholders, and as such are subject to their control. Since it is control of the company that determines attribution, being a director or secretary in itself would not indicate control unless the person held shares in the company which gave them a controlling interest.