Why bother with a company constitution?
This week on You Legal TV we take a closer look at the use of a company constitution as opposed to the replaceable rules of the Corporations Act 2001 (Cth).
You may have never considered going to the effort of drafting a constitution specific to your business, however there are considerable differences between the two and a company constitution can aid you in the efficient and easy running of your company in several ways.
Tune in below to find out how.
See below for complete transcript of this episode -
Whether you are setting up your first or your 21st company, you might have to consider whether to use the so called replaceable rules under the Corporations Act or whether to write your own constitution.
This can seem a daunting task and many, assuming that the company is eligible to do so, are easily swayed by the readiness of the existing replaceable rules. After all, if they are already there why not use them?
However, as with many things, the time taken to sit down, consider and create a bespoke approach that fully caters to your company’s needs may be a rewarding endeavour in many ways.
Firstly, it will provide you with the opportunity to carefully consider how your company will operate and what is important.
For example, if flexibility in the appointment or dismissal of directors is important, a tailor made constitution can accommodate almost any requirement. You can set the number of directors, and give them the power of appointment. You can dictate that directors will be automatically removed in certain circumstances such as ill health.
With a constitution you can be much more flexible with the rules for holding meetings, casting votes and passing resolutions.
If your company is a part of a large corporation, a constitution has the ability to authorise directors of wholly owned subsidiaries to act in the best interests of their holding companies.
From a practical point of view, a constitution brings all the rules together in one document, while the replaceable rules have to be chased throughout the entire Corporations Act, and of course a constitution can be modified and amended by members. The replaceable rules offer no such opportunity.
If you are considering the benefits of a tailor made constitution, the team at You Legal would love to help you design a document that works for your business.
What Should I Do Next?
Contact us if you would like further legal advice on company constitutions. Our lawyers at You Legal will be happy to assist you in whatever way we can.
* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.