Company's Constitution and its Amendment under Corporations Act, 2001

Bachelor of business / Bachelor of accounting
Unit: Business Law
Unit Code BO1BLAW204
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Date:
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(1)
According to the Corporations Act, 2001, the internal management of the company has to be
governed by (i) the relevant provisions of the Act; (ii) the Constitution of the company; or (iii)
By Both. The constitution of a company contains the rules that can be used for governing the
company. These rules can also be used to manage the relationship that is present within the
company, its members and directors. These rules are not present in the Corporations' Act also.
Generally they are based on the replaceable rules that are present in the Corporations' Act. But it
is possible to customize these rules and at the same time it is also necessary that the shareholders
should agree regarding the rules going to be adopted by the company. In this regard, it is
advisable to take help from compliance experts or lawyers. In this way, it can be stated that the
company's Constitution works along with shareholder agreements.
The purpose of Company's Constitution: the purpose behind adopting it was before the company
is the deal with the routine operations of the company. Due to this reason, the rules that are
provided by the Constitution of the company provides certainty and also flexibility in the
governance of the company. Similarly, the rules mentioned in the Constitution allow more
control on the company as the company develops and undergoes certain changes (Mentha v GE
Capital Ltd., 1997). The replaceable rules are very simple in nature. In fact, in certain instances,
these rules can be too simple. Due to this reason, when a company has been purchased online
with replaceable rules, the company goes for changes shortly. Under the corporations law, it is
permissible that the replaceable rules can be replaced and the Constitution is necessary to outline
these changes. But in this regard, adopting Company's Constitution as a part of his legislation is
generally more cost effective. But if a company decides to a foreign Constitution after its
incorporation, such a company is required to pass a special resolution in this regard. The rules

that have been prescribed by the ASIC in this regard requires that for this purpose, the company
should give a notice of at least 30 days in order to pass a special resolution by public listed
company. On the other hand, the notice period is 21 days. For this purpose, in case of other types
of companies. In order to pass such resolution, it is required that the reason the purpose of
members should give their vote supporting the resolution. Due to this reason, it can be expensive,
as well as time consuming to adopt a constitution after the company has already been
incorporated.
The company's Constitution also plays a role in assisting the company in amending the balance
of power that exists between the directors and the shareholders of the company, particularly their
clear Is present in the control of the company. Therefore, for example, the company's
consultation may allow the shareholders to give certain directions to the directors or even to turn
over the decisions taken by the directors (Herzberg, Bender and Gordon-Brown, 2010). Hence it
is clear that a significant role is played by company's Constitution in governing the company.