Amending Company Constitution

Running head: Amending Company Constitution 1
Amending Company Constitution
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Amending Company Constitution 2
Question 1
Issue
What are the documents that govern company operations?
Rule
Corporations Act
S 134
S 136
Application
Section 134 of the Corporations Act provides the manner in which a company is
internally managed. A company may apply the replaceable rules provided under the Act or
the company may decide to adopt a constitution to govern its operation. However, the
company may also decide to adopt a constitution and also apply the replaceable rules to
manage its internal operations. Section 136 of the Act provides the manner in which a
company constitution is adopted.
A company constitution can be adopted at registration by all proposed members
consenting in writing. However, after registration the company can only adopt constitution
through a special resolution or court order. At registration, all the members have to consent to
adopt the constitution, however, after registration it only needs 75% of members votes to
adopt a constitution. Where a company has adopted a constitution it can decide to restrict the
powers of its officers or provide objects limiting the company’s powers as per s 125 of the
Act. However, restrictions on the objects and powers of the officers of the company do not
invalidate dealing merely where they have been violated. This might be due to the
presumptions provided under s 129 of the constitution. However, dealing will be invalidated
where the third party was aware or suspected the defects in the authority of the officer or the

Amending Company Constitution 3
violation of the objects of the constitution, 128 (4) of the Act (Tomasic, Bottomley and
McQueen, 2002, 211).
The purposes of the constitution as provided under s 125 of the Act include restricting
the powers of the corporation’s officer and limiting the objects of the company. Even though
the violation of objects or articles of the constitution has no effect on dealings with the third
parties, the directors violating the constitution can be held liable as was stated in ANZ
Executors and Trustee Company Ltd v Qintex Australia Ltd (1990) 8 ACLC 980. The
directors can also be held to have violated ss 180 and 181 of the Act where they violate the
company’s constitution (Cassidy, 2006, 105). Breach of the company’s object is a contract
breach as per s 140 of the Act and innocent party has a right to seek remedy in court. This
could be the common ready of breach of contract such as damages and injunction (Gillies,
2004).
The company constitution can also be used to protect the interest of members in a
small company who intend to retain control of the company. Since there can never be term in
the constitution prohibiting amendment or repealing constitution as was stated in Peter’s
American Delicacy Co Ltd v Heath (1939) 61 CLR 457, members can, thus, adopt an article
in the constitution requiring higher threshold or condition to amend an article of the
constitution appointing board of directors, s 136(3). The company can also be used to provide
the structure of the company. The company also provides the voting rights in the company
meeting as well as meeting notice period.
Conclusion
The Act, therefore, provides the constitution as the document which governs a
company registered under the Corporations Act
Question 2
Issue