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Questions Library Business Set Up , Regulatory Compliance , Startups What Are The Replaceable Rules In The Corporations Act?
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What Are The Replaceable Rules In The Corporations Act?

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Every company needs some ground rules to govern how it is managed. The company constitution usually serves this purpose, however, a company can also choose to simply rely on the replaceable rules in the Corporations Act instead.

The replaceable rules in the Corporations Act are a basic set of rules that work in the same way as a constitution. Think of it as the default set of rules that apply to companies that don't have a constitution.

The replaceable rules cover topics such as:

  1. How to appoint and remove directors
  2. Remuneration of directors
  3. How voting works
  4. How to execute documents
  5. Role of the secretary
  6. Rights around inspecting company books and records
  7. How to hold meetings and pass resolutions
  8. How shareholder proxies work
  9. Dividend rights
  10. What happens to shares if a shareholder dies, is incapacitated or becomes bankrupt
  11. How transfer of shares work

As you can see, it sets out most of the basic rules you'd expect in a company constitution. It is a good place to start if you're trying to save on costs and get set up quickly.

However, the replaceable rules are not as comprehensive and up to date as a company constitution drafted by a lawyer. The advantages of getting a company constitution, instead of relying on the replaceable rules, is that constitutions written by a good lawyer will be updated to reflect current best practice and can be tailored to the requirements of your company.

Tomoyuki Hachigo  
Tomo is the co-founder of Sprintlaw and a commercial lawyer with a broad range of legal experience. Before starting Sprintlaw, he was an M&A lawyer at a top-tier law firm advising businesses of all sizes from large corporates to startups.

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