In the time since you established your company, your business, and the law have probably gone through some significant changes, which should be reflected in your company’s constitution.

When you register your company through LawPath, you will be provided with an amenable company constitution. Our quick quotes service will also connect you with our network of lawyers that can assist in drafting a company constitution specific to the needs of your business.

What is a Company Constitution?

The Constitution is a document typically drawn up prior to the registration of the company. A Company Constitution is a set of rules to guide directors and officers in the operation and internal management of the company. The Constitution essentially has a the same legal effect of a contract between all the individuals within the company.

Company Constitution vs Corporations Act Replaceable Rules

It is important to note that while a company constitution is recommended, it is not necessary for every company. Replaceable rules are similar to a constitution, however unlike company constitutions, replaceable rules are found in the Corporations Act and will apply unless they are modified by a constitution. To find out more about the differences and similarities between a company constitution and the Corporations Act Replaceable Rules check out our guide.

When to Amend Your Company’s Constitution

If you have made changes to your company details through ASIC or if a few years have passed since you updated your company Constitution, then it’s probably time to rehash the documentation and review it between individuals within your business and an experienced commercial lawyer.

How to Modify a Company’s Constitution

A company may modify or repeal its constitution through something called a special resolution of shareholders. A special resolution occurs when shareholders meet and discuss significant changes to the company’s constitution.

Notice of the special resolution must be given to shareholders at least 21 days prior to the when the meeting is held. A notice of the meeting must be sent out to shareholders advising them of the meeting, the proposed special resolution and the venue, date and time of the meeting.

A resolution will be passed if at least 75% of the shareholders agree to the amendments. These amendments will then bind the all the shareholders, including those that voted against the modifications.

Legal Issues Associated With Majority Decisions

A company constitution differs from a contract in the way that amendments can be accepted by individuals. In a contract, any modifications to the contract must have the unanimous support of all parties to the contract. In the amendment of a company’s constitution, however, a majority of 75% must be met to pass the modifications.

Majority decisions in a company’s Constitution provides a few issues about the rights of shareholders of companies. Legal rights and protections to shareholders can be found in the Corporations Act.

Unsure where to start? Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from one our network of 600+ expert lawyers or any other legal needs.

Dominic Woolrych

Dominic is the CEO of LawPath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.