When you set up a company you must make choices as to how you will manage it. A company Constitution will assist as it sets out the rights and responsibilities of directors, shareholders, other stakeholders and oversees the company's activities. The Australian Securities and Investment Commission (ASIC) also highly recommends that all proprietary limited companies adopt a Constitution.
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Understanding Company Constitution
A Company Constitution is essentially a structural framework governing the relationship between a company's directors and shareholders that will set out their expectations and any conflict resolution strategies.
Mandatory requirements set forth by ASIC necessitate the adoption of a company constitution or the utilisation of replaceable rules from the Corporations Act 2001(Cth). Company Constitutions are obligatory for entities categorised as 'special purpose companies' and 'no liability' public companies.
Key provisions to be included within a company Constitution typically include:
Various avenues exist for the creation of a company Constitution:
Amendments to the constitution necessitate special resolutions, adhering to specific protocols regarding notification, voting, and documentation submission to regulatory bodies.
Replaceable rules, enshrined within the Corporations Act, offer a basic framework for internal governance, applicable when a company opts against adopting a Constitution.
The benefits of a company Constitution include:
Company constitutions operate as contractual agreements between:
Company constitutions play a pivotal role in delineating corporate governance structures. Consultation with legal experts or utilisation of provided templates can ensure adherence to regulatory standards and ensure you are aligned with your company’s objectives.