Constition with Division 7a (Div7a) Loan Clauses

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eCompanies provides a constitution from TressCox Lawyers with all new company registrations. Our constitution includes custom share classes and Division 7A (Div 7a) loan clauses as standard within our $50 registration fee, something our competitors often charge around $100 for. If you wish to use the replaceable rules instead of our provided constitution we provide a collated version for download.

Division 7A loan provisions

One way that people used to evade tax was to make interest free loans to directors/shareholders from their company. The director would never repay the loan and wouldn't have to pay tax on the money received. Div 7A aims to stop this by ensuring that loans have a set lifetime with minimum repayments at an interest level set by the ATO.

If your company makes a loan without having a Div 7A agreement in place then the ATO will consider the loan a 'bad dividend' and tax the loan very unfavourably. Our constitution contains the clauses that would form the bulk of a Div 7A loan agreement. We also include further instructions on how to execute a loan with our documentation bundle.

More information on Division 7A can be found at the ATO website.

Custom share rights

Some companies may wish to issue shares with specific rights attached to them rather than the standard Ordinary shares. Using the replaceable rules and issuing shares other than Ordinary shares will require you to write a supplement to the standard rules specifying the rights attached to those shares.

For the companies that wish to issue shares with specific rights, our constitution provides the following classes of shares.

Meeting Voting Dividends Winding up Subject to redemption
Ord Yes Yes Yes Yes No
A Yes Yes Yes Yes No
B Yes Yes Yes Paid price only No
C Yes Yes No Paid price only No
D Yes Yes No Yes No
E no No Yes Paid price only No
F no No Yes Yes No
G Yes No No Yes No
H Yes No No Paid price only No
I Yes No 5% Non-cumalitive on issue price Paid price only Yes
J Yes No Yes Paid price only Yes
K Yes Yes Yes Paid price only Yes

Meeting = the right to attend meetings of shareholders.
Vote = the right to one vote per share held at all meetings of the company.
Dividends = the right to parcipate in dividends (if any) determined by the directors to pay on that share.
Winding up = the right to repayment of the paid issue price of the share and participate in the division of surplus assets or profits of the company.
Redemption = the company at its discretion, may redeem the shares for the paid price with seven days notice.

Superannuation Trustee

If your company is a special purpose superannuation trustee company we include the necessary clauses required for compliance. If your company ceases to be a special purpose company in the future the constitution will still be valid.

Fit for purpose

Although Our constitution is carefully crafted to be suitable for the vast majority of small companies, we can't guarantee that it is fit for your particular company. In the event you wish to replace/modify the constitution or supplement it with a share holders agreement, we highly recommend you use TressCox Lawyers. They have a wide range of precedents for various company types and sizes and offer excellent service.

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