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Corporate and Commercial calendar    May 21, 2021

What is a Company Constitution?

A company constitution is a contract between the company and the members, directors and company secretary which governs how a company operates.

A company constitution is a contract between the company and the members, directors and company secretary which governs how a company operates. It will generally cover the following:

  • How company meetings will be organised
  • The rights of shareholders
  • How company documents will be executed
  • Appointment and removal of directors
  • How to amend the constitution

Do I need a company constitution?

It is not necessary to have a company constitution unless your company is a ‘No Liability’ public company or a ‘special purpose company’ that wants a reduced annual review fee.

While it is not a requirement for all other companies, it still may be a good idea to have a constitution. Without one your company will be governed by the replaceable rules in the Corporations Act 2001. The replaceable rules can be replaced or modified by your company constitution. However, despite their name, some replaceable rules are mandatory and will apply to all companies, regardless of whether there is a constitution.

One of the major benefits of a company constitution is the flexibility to tailor the constitution to the needs of your company. Some replaceable rules also contain onerous obligations and give shareholders powers that could be undesirable. Additionally, company constitutions can provide more comprehensive guidelines about how your company will be run. It is also convenient to have your corporate governance documents easily accessible rather than having to refer to the Corporations Act.

Can I alter a company constitution?

Yes, a constitution allows you to have flexibility. You can modify, or even repeal, an existing company constitution by passing a special resolution. Special resolutions need to meet certain criteria before being passed. This will be laid out in your current constitutions rules, or the replaceable rules in the Corporations Act.

When can I make a company constitution?

If you are starting a new company, you may wish to adopt a constitution on registration. Alternatively, if your company is existing you can adopt a company constitution by passing a special resolution.

If you would like more information about company constitutions, please feel free to get in contact with one of our experienced commercial lawyers at Frank Law on (02) 9688 6023.

This is not legal advice. 

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