A group of potential investors headed by John Macarthur (son of John Macarthur of the notorious NSW Rum Corps) soon formed and in June 1824 the Australian Agricultural Company was enacted in Parliament. By November 1824, a Royal Charter was issued and agents appointed in the colony to act on behalf of the Company. These were James Macarthur, H.H. Macarthur and James Bowman, later husband to Miss Macarthur. Surveyor General John Oxley was consulted on the possible location of land suitable for growing fine wool. After rejecting his suggestions of land in the Liverpool Plains, Upper Hunter, Bathurst and Upper Hastings River on the grounds these areas were either too far from the coast and transportation, or too densely settled, land at Port Stephens was chosen and the company began to establish itself there by 1926. (Gregson 1907 22-30)

In the first years of its operation the Australian Agricultural Company struggled to establish its ambitious enterprise and this was not helped by the fact that the land at Port Stephens was not particularly suitable for raising sheep. It was not until after 1829 when Sir Edward Parry was appointed commissioner of the company that the search for suitable fine wool growing land began in earnest and Parry proposed a swap of land at Port Stephens for another more appropriate tract of land. In 1831 on the advice of surveyor Henry Dangar, Parry made the decision to select two large runs at Warrah Creek and Goonoo Goonoo which were considered favourable for raising fine-wool sheep. Finally in 1833, after the initial rejection of the scheme by Governor Bourke and then the insistence of the Colonial Office in London, two grants of 240,00 (Warrah) which included Windy Station and 360,000 acres
(Goonoo Goonoo) were made to the AAC.(Gregson 1907 52 – 59).