Do You Need a Company Constitution?

Do You Need a Company Constitution?

A company constitution is a document that governs a company’s activities and also sets out the relationships of the company directors and shareholders. It sets out how the internal management of a business works.

Is a company constitution mandatory?

The Australian Securities and Investment Commission (ASIC) that regulates Australian companies, sets out clearly that when you register your company, you choose between:

  1. having a constitution,
  2. adopting the Corporations Act’s replaceable rules, or
  3. a bit from both.

This means that you can adopt the replaceable rules instead of having a constitution.

What if I don’t have a company constitution?

If you opt to not have a company constitution, then you need to implement the replaceable rules in the Corporations Act. The Corporations Act governs all Australian companies.

The replaceable rules cover areas such as:

  • Officers and employees;
  • Directors meetings;
  • Meetings of members;
  • Shares and transfer of shares;
  • Inspection of books.

Even if you have adopted the replaceable rules, you can replace these rules with your own company constitution at any time.

Amending your company constitution

You may amend or repeal all or part of your company constitution by passing a special resolution at a members’ meeting. The special resolution needs 21 days’ notice and usually needs a 75% majority vote to pass. If a company is requested to provide the constitution to a member, it must be provided within 7 days. For this reason, it is very important to ensure that the constitution is up to date at all times.

How do I create my company’s constitution?

It is advisable that you engage a business lawyer to draft a constitution specific to your company’s circumstances. Many lawyers will be able to provide you with a reasonable fixed-fee quote for creating your company constitution and completing related initial company documents and filings.

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