What Is A Special Purpose Company Constitution?

When setting up a company, it’s important to know how everything will work. For example:

• Who can be a shareholder?
• How many shares can be purchased?
• What if a director wants to step down?
• What are the rights and duties of key personnel?
• How will disputes be handled?

These are all matters that would generally be covered in a Company Constitution. This is essentially the governing document which sets out how the company will operate. 

If you’re thinking of converting your existing company into a special purpose company, it’s important to have a Special Purpose Company Constitution drafted by an expert lawyer. 

So, what exactly is a special purpose company, and what might your constitution look like? Read on to learn more. 

What Is A Special Purpose Company?

To better understand what a special purpose company is, it’s best to look at regular companies. These companies operate for the general purpose of making a profit. 

A special purpose company, on the other hand, is driven by a certain purpose. For example, a Not-for-profit company is considered a special purpose company because it operates solely for charitable purposes, thus it falls under a ‘special purpose’. 

Since it’s slightly different to a regular company, the Constitution needs to be drafted a bit differently, too. Read on to learn more. 

What Does A Special Purpose Company Constitution Cover?

A Special Purpose Company Constitution is similar to a regular constitution in that it outlines key matters around how things will be run. However, what makes it different is that you need to specify what your purpose is, and outline restrictions around how money will be distributed within the company. 

For example, if you’re a Not-for-profit organisation, your Special Purpose Company Constitution should outline some of the following:

• The company needs to use any income they receive for promoting charitable purposes only
• The company is not allowed to distribute profits to members
• The company cannot pay fees to its directors (also known as directors’ fees)
• The directors must approve all other payments the company makes to them

This is consistent with other Australian laws around not-for-profit organisations, like charities. If you want to Set Up A Charity, for example, you’d need to have a Charity Charter which you can then register with the ACNC. 

So, generally speaking, special purpose companies have additional requirements that must be complied with, otherwise you could risk your status as a special purpose company or face heavy penalties. 

Where Can I Get A Special Purpose Company Constitution? 

No matter what type of company you are, it’s always best to seek the help of an expert lawyer when drafting a Company Constitution. After all, this document will be setting out how everything will be run within the company, so you want to make sure it is crystal clear and unlikely to cause legal headaches later. 

At Sprintlaw, we offer a Special Purpose Company Constitution package which includes the following:

• A constitution with your company’s specific purpose
• Phone consultations with one of our expert lawyers who will chat through your options

Our lawyers specialise in a range of areas and can answer your legal questions. It’s important that your Constitution accurately reflects your business structure, goals and overall purpose. 

Key Takeaways

A Special Purpose Company Constitution will look a little different to your standard company constitution, so it’s wise to seek legal help from a professional. 

Your constitution should be drafted with close consideration of your business plan, your resources and the roles of key personnel. If you need help setting up a special purpose company, or you need documents such as a constitution, our team of legal consultants are happy to have a chat with you. 

If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Rowan Gardoce

Rowan is the Marketing Coordinator at Sprintlaw. She is studying law and psychology with a background in insurtech and brand experience, and now helps Sprintlaw help small businesses