Constitution (Proprietary Company)

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. Company constitutions specify the rules governing the directors and shareholders in relation to the operations of a company.

The Australian Securities and Investment Commission (ASIC) requires that each company must choose to use their own Constitution or adopt replaceable rules from the Corporations Act 2001(Cth) or use a combination of both. Therefore, before you register your company, you must either draft a Constitution or seek to adopt the replaceable rules.

Constitutions are generally adopted upon company formation, although they may be adopted later by passing a special resolution of shareholders.

This constitution is drafted for a proprietary company limited by shares. Public company constitutions must follow different rules.

Constitutions may operate alongside or overrule the replaceable rules contained in the Corporations Act 2001 (Cth). There are benefits to having a company constitution that will override the replaceable rules:

• There are broader provisions that can be included in a constitution compared to replaceable rules.
• A constitution can be customised to suit the specific situation your business is in and to suit the specific needs of your business.
• You can manage your business with greater flexibility using a constitution.
• You can amend your constitution, but you can’t amend replaceable rules, as replaceable rules can only be amended by reforming the law.

For more information, see Company Constitution or Replaceable Rules?

This constitution has optional wording to make the constitution compatible with a shareholders' agreement. Lawpath provides a shareholders' agreement template compatible with this constitution.

How to adopt or amend a constitution?

You can adopt or amend a constitution by passing a special resolution of shareholders. To do this, the following steps must be followed:

1. You must provide notice of the special resolution, a minimum of 21 days for a proprietary limited company, or however long the current constitution requires.
2. The notice you provide must include information on the location, date and time of the meeting, any technology used to join the meeting, proxy voting information, and an agenda including information regarding the special resolution(s).
3. For the special resolution to pass, 75% of the votes cast must be in favour of the resolution
4. After the special resolution has been passed by the company, a Pty Ltd is required to provide an updated version of the constitution to any member who requests a copy within seven days.

Use this Constitution if:

• You want to decide how your company is run and governed.
• You have chosen not to adopt the Replaceable Rules provided by the Corporation Act.
• You want a more tailored and customisable internal governance approach.

What does the Constitution cover?

The following list are some of the main areas that the company constitution will address:

• The company’s structure;
• The issue of shares;
• Transfer of shares;
• Share certificates;
• Meeting governance;
• Voting procedures;
• Directors;
• Company secretary; and
• Dividends.