Holding company records done right

What was broken

A deep-tech hardware startup was raising from overseas investors who wanted to invest into a holding company in a neutral jurisdiction rather than directly into the home operating entity. The founders needed a compliant cross-border structure that respected local foreign-exchange rules, protected the IP, and did not jeopardise home-market R&D incentives.

What we did

CapEasy worked with international counsel to design the holding structure and the relationship between the holding company and the operating entity — advising on cross-border capital-flow considerations, inter-company and IP arrangements, and the shareholding flow. We coordinated the home-market regulatory filings and made sure the structure held together across both jurisdictions.

Where it landed

The startup established a compliant international holding structure that satisfied its overseas investors while keeping home-market operations and R&D incentives intact. The structure was built to support subsequent rounds without re-engineering.

What an Australian group is actually asked to produce

Put an Australian holding company over one or more subsidiaries and three parties will eventually ask for proof it holds together on paper: ASIC, on the annual review; a registered agent, if you use one to lodge; and an investor or auditor, on diligence. None of them ask you to describe the structure — they ask to see the artefact that proves it. For ASIC that artefact starts with the register of members: every company must keep a register recording each member, the shares they hold, the date of each allotment, the share class and whether the shares are fully paid. A holding company's claim to own 100% of a subsidiary is only as good as that subsidiary's own register showing the holdco as the member.

A registered agent can lodge on the group's behalf, but that does not move the obligation off the officeholders — the agent files the form; the group still has to have the underlying record right before the form is submitted.

The single entity question — and why it matters even if you answer no

The ATO gives wholly-owned Australian corporate groups an option, not a default: a group where one company owns 100% of another company, trust or partnership may elect to consolidate for income tax, so the group is taxed as a single entity, lodges one return, and pays one set of PAYG instalments. Eligibility is mechanical — the head company must be an Australian resident not itself a subsidiary of a consolidatable group, and each subsidiary member must be wholly owned, directly or indirectly, by the head company. Consolidation is optional but irrevocable, and it is "one in, all in": every eligible wholly-owned subsidiary comes in together, no picking and choosing.

The ATO's own framing of the alternative is the discipline that matters whether or not a group ever consolidates: "where a wholly-owned group does not choose to consolidate, the income tax system treats each company in the group as a separate entity" and "each member must separately account for all intra-group transactions and debt and equity interests." That is the case for the deep-tech engagement above and for most early groups — separate ledgers per entity, intercompany transactions recorded and reconciled on both sides, never netted off because "it's all the same group anyway." Books that blur the entities cost more to unwind later than they save by combining now, and they make the eventual consolidation decision — if the group ever wants it — a reconstruction project instead of a paperwork one.

Money moving inside the group is not a formality

Once a holding structure exists, funds tend to move between the entities — working capital down to the subsidiary, dividends or management fees back up. Where a private company provides a payment or benefit that reaches a shareholder or their associate, including via another entity in the chain, Division 7A of the Income Tax Assessment Act 1936 can treat it as a deemed dividend for income tax purposes, whatever the participants privately call it — a loan, an advance, a gift, or a debt written off. A payment that is repaid or converted into a Division 7A complying loan by the company's lodgment day for that income year avoids the deemed-dividend treatment; left undocumented, it does not.

The practical implication for a holding group is the same discipline as everywhere else in this business: every inter-company transfer gets a paper trail — the terms, the date, which entity it moved between — kept as it happens, not reconstructed when a director or an auditor asks where the money went. Whether a specific transfer falls inside Division 7A, and what to do about one that does, is a call for the group's registered tax agent; the discipline of documenting the movement is what makes that call answerable in the first place.

The annual forcing function

ASIC's company annual review is not optional bookkeeping hygiene — it is the yearly point where the group's records have to hold up under a signature. Alongside paying the review fee and confirming officeholder and share details are current, directors of each company in the group pass a solvency resolution confirming the company can pay its debts as and when they fall due, and a negative or missing resolution has to be notified to ASIC within 7 days on Form 485. That resolution is easy to sign when the entity's books are separate, reconciled and current all year; it is a scramble when the holding company's and subsidiary's numbers have to be untangled from each other first. Treat the annual review date as the deadline the rest of the year's record-keeping is built around, not a form that turns up once a year.