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.