A Company Constitution is one of the most important documents a business will have. At times, parts of the document will no longer reflect what the company needs. This is when it’s time to make changes.
If you’re a company considering making changes to your constitution, then there’s a process that needs to be followed. The steps you take will depend on the type of company you are, including what is required of you from other departments.
What Is A Company Constitution?
A company constitution is a document detailing the rules and regulations that govern a company. It’s a legally binding document, however, it is not a requirement to have one.
A company can choose to adopt a constitution before or after they have registered their company – there is no time limit.
Constitution vs Replaceable Rules
As mentioned before, having a company constitution is optional. The Corporations Act 2001 has a set of replaceable rules that apply if there is no company constitution in place. The replaceable rules, while fair, are broad and general. Therefore, the application of the rules set out in the Corporations Act may not suit the company.
A company constitution, on the other hand, can amend their internal policies to suit the unique requirements of your business.
Can I Change My Constitution?
Yes, a company can change their constitution. In fact, as your company goes through changes, it is likely that you’ll need to amend your constitution to better reflect the way things are run and managed.
Firstly, a special resolution will need to be passed. There needs to be at least 28 days of notice for the special resolution if you have a public company. For other company types, the minimum amount of time to announce a special resolution is 21 days.
Once the resolution has been announced, in order for it to be passed it will require 75% of votes.
How To Amend Your Constitution Under The Corporations Act
Firstly, to pass a resolution, you will need to review the existing rules. At times, a company constitution will have already covered the requirements for changes being made to it. If this is the case, then the rules of the constitution will need to be adhered to first. If there isn’t, then the next step is to identify the resolution that needs to be passed.
Next, the relevant stakeholders will need to be notified. A general meeting for the directors and shareholders of the company will need to be issued. At the general meeting , the resolution and proposed changes to the constitution will need to be discussed.
Afterwards, there will need to be a vote. As mentioned previously, for a resolution to pass, it will need 75% of votes. All members will need to be present for the vote therefore, if a certain member can’t be present they can send a proxy to place their vote for them.
After the vote has happened and the resolution has been passed, then it’s the company’s responsibility to notify the relevant authorities and provide copies of the changes to its members.
Do I Need To Notify ASIC?
ASIC is generally the organisation that governs the regulations for companies. When changes occur to your company, notifying ASIC is one the first things you need to do.
According to section 136 of the Corporations Act, a public company must notify ASIC of any changes made to its constitution within 14 days of the resolution being passed. A copy of the changes must also be provided.
Depending on the type of change you’ve made, there are particular forms to submit. If you’re unsure, you can chat to one of our expert lawyers who can walk you through the process and ensure you haven’t missed any key steps or details.
How Would This Play Out?
There’s a lot to take in, so let’s consider this scenario.
Happy Bears is a corporation that produces and sells some of the most beloved toy bears for children in Australia.
Happy Bears have been re-evaluating their core values for some time now and have taken the initiative to be more sustainable in their practices. In order to fully implement this, they will need to make some pretty big changes to their company structure as their carbon footprint is currently too high.
The members of Happy Bears assess the company’s constitution and review the existing rules. In order to implement their changes, they will need to hold a general meeting and then a vote.
They issue a notice and a month later, everyone gathers for the meeting. Here, the resolution is discussed and everyone goes back home to think about it. Another few weeks pass by before the vote occurs. All members show up and place their votes – the resolution passes with 90% of votes in its favour.
The company constitution is updated, all members are provided with a copy of it. Since it is a public company, they notify ASIC by way of a Form 205.
The resolution takes effect from the date it was signed and the relevant changes are implemented within the company.
A company’s constitution can be changed however, this is subject to processes and rules. This will often depend on the type of company you have and the objective you are trying to achieve.
Having the advice of a legal professional can make this transition much more manageable.
If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or firstname.lastname@example.org for a free, no-obligations chat.
Our expert corporate lawyers are just a click away.