What Are The Replaceable Rules In The Corporations Act?
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:
- How to appoint and remove directors
- Remuneration of directors
- How voting works
- How to execute documents
- Role of the secretary
- Rights around inspecting company books and records
- How to hold meetings and pass resolutions
- How shareholder proxies work
- Dividend rights
- What happens to shares if a shareholder dies, is incapacitated or becomes bankrupt
- 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.
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