The Company Constitution is a set of document that sets out the rules and manner in which the company is being regulated and managed. In the past, this was referred to as the Memorandum of Association and Articles of Association. Since 3rd January 2016, these two documents have been merged into the Company Constitution. In essence, the Company Constitution is the rule book or laws that govern how the company should be run. Whenever company directors and shareholders come to our firm to ask us whether certain changes can be made and how they can be made, our response will always be that we will need to take a look at the company constitution to see what needs to be done to effect such a change. As constitutions may differ between companies, it would be wrong to assume that the way in which changes were made for one company could be applied to another company. The Company Constitution is a statutory contract between the members, or commonly referred to as shareholders, and the company. Either party can enforce the terms of the Company Constitution.
A model constitution has been provided in the Companies Act and companies can choose to adopt this constitution. When incorporating a company, there is a choice given to adopt the constitution in force at the time of adoption. The model constitution is a good platform for companies to build a company on. However, to safeguard certain interests, the constitution may be amended or a separate constitution may be drafted to replace the model constitution. If at the point of incorporation, if this alternate constitution is available, the incorporation of the company can be done with this custom constitution. There may be instances when a company may wish to change certain terms in the constitution. For example, if a company is growing in members then it may be difficult to reach 75 per cent shareholders’ consensus when voting on certain matters. The constitution can be amended to set out to make the relevant changes.
To change the Company Constitution, a special resolution needs to be passed in a general meeting. A notice of the meeting of not less than 14 days for private companies and 21 days for public companies are required to be sent out to shareholders and 75 per cent of the voting rights have to agree to the change in the constitution. The change has to be filed with ACRA by the company officers, usually the company secretary.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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