What Is A Company Constitution?
The constitution of a company is the document setting out the rules for the internal management of the company.
It is essentially a contract between the shareholders, directors, and the company, prescribing the rights, roles and responsibilities between these parties. Think of it as the rule book setting the foundations of the company.
Typically, a company would adopt a constitution when first incorporating, but some companies simply choose to rely on the replaceable rules of the Corporations Act 2001.
Some topics usually covered in a company constitution are:
- How to issue shares
- Rights of different share classes
- How unpaid shares work
- Liability of shareholders
- How transfer of shares work
- What happens to shares if a shareholder dies, is incapacitated or becomes bankrupt
- How to hold meetings and pass resolutions
- How voting works
- How shareholder proxies work
- How to appoint and remove directors
- Remuneration of directors
- Powers of directors
- Role of the secretary
- Role of the managing director
- How to execute documents
- Dividend rights
- Winding up the company
- Loans to shareholders
- Indemnity and insurance
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