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Which Australian companies need a constitution?

14 January 2020

Which companies need a constitution?

Private companies do not need to have a constitution, in fact, the only ones that do are:

  • no liability public companies; and 
  • special purpose companies 

Also, while a special purpose company does not need to submit their constitution to ASIC, they should keep it with their company records.

What is a constitution?

So what exactly is a constitution? It’s a contract, between:

  • the company and each shareholder
  • the company and each director
  • the company and the company secretary, and
  • a shareholder and each other shareholder.

When to setup and adopt a constitution

A company may draft and adopt a constitution before or after registration. 

Constitution at company registration

If it is adopted before registration, each shareholder must agree in writing to the terms of the constitution. 

Constitution post company registration

If a constitution is adopted after registration, the company must pass a special resolution to adopt the constitution.

Constitution changes

A company can change or repeal its constitution by passing a special resolution. 

A special resolution needs at least 28 days notice for publicly listed companies and 21 days notice for other company types. For the resolution to pass, you’ll need at least 75% of the votes to be cast in favour.

Replaceable rules - an alternative

If you would like some internal rules to manage your company, your alternative to drafting a constitution is to use replaceable rules found in the Corporations Act 2001 (Cth).

You can learn more about replaceable rules here.

Do you have questions or comments about a constitution? Be sure to leave them below. 


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Vivian Michael
 

Vivian Michael is a lawyer and founder of Michael Law Group. Vivian's mission is to deliver the best quality business legal services to entrepreneurs launching an Australian business, wherever they are in the globe.

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