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What Is A Company Constitution? (2019 Update)

What Is A Company Constitution? (2019 Update)

A company constitution can sometimes be a legal requirement, but is always a good idea for business management best practice.

27th February 2019

A company constitution governs the company’s internal management. A Constitution is an essential and crucial document that oversees the activities of your company as well as the relationship of your company’s directors and shareholders.

Why do I need a constitution?

Having a constitution is both a legal requirement for some companies and is part of good business management practice. You are required to adopt a constitution when registering your company. The Australian Securities and Investment Commission (ASIC) requires that you choose between having your own company constitution, adopting the Corporation Act’s replaceable rules, or a combination of both. It is necessary then to have had either drafted up your company constitution or be seeking to adopt the replaceable rules before registering your company.

What are the replaceable rules?

All Australian companies are governed by the Corporations Act. This piece of legislation sets out various laws that companies and company office holders must abide by. The Corporations Act also contains a set of replaceable rules which can act in place of a constitution and govern a company’s internal management.

The following is an example of the provision which the replaceable rules cover:

  • Offices and employees (i.e. powers of directors);
  • Inspection of books (i.e allowing members to inspect books);
  • Directors’ meetings ( director’s meeting should be run);
  • Meeting of members ( voting should be carried out);
  • Shares and transfer of shares (i.e. provisions about paying dividends);

You can choose at any time to modify or displace the replaceable rules by way of your own company constitution. Note also that the replaceable rules do not apply to companies that have a sole member/director. They are also not applicable where the member/director is the same person.

How do I create a company constitution?

You can create a company constitution yourself using a template, seek the advice of a company lawyer or use ASIC’s replaceable rules. When you register your company through LawPath, you will be provided with an amenable company constitution. Another option is to engage with a company lawyer, who can draft a constitution specific to your business. Whichever option you choose, it’s crucial that you have an effective company constitution that will govern your company’s internal management.

Amending your company constitution

You can modify or repeal provisions within your constitution by passing a special resolution. For a special resolution you must give at least 21 days notice and the agreement of usually 75% majority of votes cast.

A company is required to provide an up to date copy of the company constitution seven days after request from a member of the company (or payment, if payment is charged). It is, therefore, imperative to have an up to date Constitution.

You can easily register a company through LawPath which comes with a company constitution.

Need more information? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

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.