Corporate Law: Governing Documents, Amending Constitution, and Limitations on Powers of Majority Shareholders

This report discusses the governing documents of a company, including the bylaws and articles of the company, and how to amend the constitution. It also explores the limitations on the powers of majority shareholders in respect of variations of the rights of the members of the company. The report includes relevant case law and references.

Running head: CORPORATE LAW 0
corporate law
SEPTEMBER 5, 2018
STUDENT DETAILS:

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Executive Summary
In respect of Juristic persons, the constitutional documents of the company are the documents
that describe the presence of the company and legalise the framework and control. They
govern the company in the effective way. The exact method of the constitutional documents
bases on the kinds of company. These documents play very important role in the success of
the company. In the following parts, the purpose of governing documents and objects of the
constitution of the company is discussed and examined.

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Contents
Executive Summary...................................................................................................................1
Introduction-...............................................................................................................................3
Governing documents of company registered under the Corporations Act 2001-.....................3
Amending the constitution of company-....................................................................................4
Limitations on powers of majority shareholders-......................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction-
The constitution of company is the base of an organization. The constitution can be amended
with necessary requirements. In the absence of these requirements, the constitution cannot be
amended. There are also some limitations on powers of majority shareholders in respect of
the variations of the rights of the members of company. The governing document includes
Bylaws and Articles of the company.
In this report, the requirements of amendment of the constitution, purpose of governing
document and limitations on the powers of majority shareholders are discussed.
Governing documents of company registered under the Corporations Act 2001-
The governing document of the registered company mean the Bylaws of company and the
Articles of company and company certificate. The registered company is in the agreement
with the terms of the governing documents of the company. The governing document of the
registered company under the Corporations Act (2001) states objectives or purposes of the
company. The governing document of the registered company addresses that how it is to be
administered. The governing document comprises all the details required to run the company
such as objects of the formation of company, powers of the company and members of the
company, the authorities of the company such as the directors, BOD, management, and
administrative department. The governing document of the company also states that how the
operations or business affairs are to be run. It also specifies the circumstances or conditions
when the company is required to be terminated.
The Articles of the registered company develop the legal base of the company. The company
Bylaws state the internal rules related to the internal management of the company. In case of

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ASIC v Rich (2009) 75 ACSR 1, the judgement redrew judgement rule. The article discuss
judgement rule. The company Bylaws also develop the rules related to management, which
give uniformity, stability, and permanence of business operations for the assurance of those
both in the company and out of the company. The company Bylaws describe the connection
between the organization and the members of an organisation and among the members of the
company themselves. The best bylaws reduce the probability of uncertainty and variance on
the framework and the operations of business. The Bylaws include provisions of bylaws such
as name of the company, objects of the company, qualification of members, qualification of
various classes of membership, fiscal policies, framework of dues, name of officers, powers
of the officers, duties of officers and rules related to filling vacancies. They also define the
meaning of the position of chief staff officer, schedules related to the meeting, details of the
committees, process of amendments, and dissolution procedure (Riggs, 2017).
Amending the constitution of company-
The constitution of company is very essential document. It comprises the rules, regulations,
guidelines, and laws of the corporation. Many examples of subjects are set out in the
constitution of company such as rights of these shares, requirement of quorum to held the
meeting of shareholders, procedure to appoint directors of company and process to remove
directors of the company (Talbot, 2015).
The constitution of company can be amended due to certain reasons. These reasons may
include the alteration of way of appointment of directors, alteration of the way of removal of
directors, to add the pre-emption rights for the new issue of shares or transfer of shares, and
to remove the pre-emption rights for the new shares or transfer of shares. The constitution of
company may amend to create the new share classes like preference shares and alphabet
shares such as class A shares or class B shares. The constitution of company can also be

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amended to compliance with statutory requirements or the regulatory requirements such as to
comply with the Professional Engineers Act. In case of confliction with external
documentation, the constitution of company is also required to be amended (Plieninger, et.
Al, 2015). In case of The Commonwealth v Australian Capital Territory [2013] HCA 55, it
was held by the court that the constitutional power of federal parliament to make law of
marriage extends to same sex marriage.
Usually, the amendment of constitution needs an approval of 75% shareholders or approval
of supermajority of shareholders. More severe provisions can also apply in many cases. It all
depends on personal circumstances of the company. In some cases, approval of unanimous
shareholders or 100% shareholders is required because of the language of current constitution
or agreement of shareholders. For the amendment of the constitution of company, notice of at
least 14 days should be provided to the shareholders of the corporation for conducting the
extra general meeting (EGM). This period of notice may avoided or evaded if the
shareholders provide their consent to the shorter notice as per the section 177 (3) of the
Companies Act (Labbe, 2017).
At general meeting, the amendments to amend the constitution will be offered as the special
resolution. It is required approval of minimum 75% shareholders to pass. The percentage of
the approval of shareholders is depended on the constitution of the company. When special
resolution is passed, it is required to amend the constitution. It is also required to update the
constitution by the company secretary of company to show these alterations and in fourteen
days of passing resolution lodge with the Accounting and Corporate Regulatory Authority of
Singapore (ACRA) a copy of this purpose along with a copy of the constitution as accepted
or modified (Lee and Kawachi, 2017).

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For the amendment of the object of company, there are many complications. The amending
the object of constitution is more difficult than the amending the other provisions of
constitution. It is also required the notice of 21 days and cool down period after making the
specific resolution (Lowry and Dignam, 2016). This longer notice of 21 days for EGM to
arrange to make the amendments in the object the constitution should be in writing-
1. All the stakeholders of the company
2. All executors for debenture holders
3. In the absence of executers or trustees of the debenture holders, then all debenture
holders of this class, who are known to the company at the time of delivering the
notice (Maniscalco, 2015).
There are also many alternatives to amend the constitution. Some shareholders can prefer to
maintain requirements confidential by making private agreement. This private agreement is
referred as an agreement of shareholders. The shareholders agreement is made between
shareholders and the company. Due to the importance of amendments of the constitution, the
minority shareholders are seen severely negotiating for them when shareholder agreement is
considered. The rights of minority shareholders should be legally enforceable otherwise, their
purpose may defeat (McLaughlin, 2018).
As the constitution amounts to a legal contract between the corporation and the members or
among the members, the members otherwise known as shareholders may take the action to
apply the requirements and provisions of the constitution. The corporation also has the
authority to take actions. In this way, the company may take the actions to force the members
of the company to conform to the provisions of the constitution. These rights of taking
actions are not given to the third person or a person who is not member. Thus, in making or
amending the company’s constitution, it is critical to deliberate the outcomes it can have in

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restricting the activities as the owner of business or the shareholders and those of other
stakeholders and corporation in common (Njie, 2016).
In the given case Plaintiff S4/2014 [2014] v Minister for Immigration and Border
Protection HCA 34, it was held by the High Court that there are some constitutional limits
on immigration detention. The case of Williams v Commonwealth of Australia &
Ors [2012] HCA 23 concerned the constitutional rationality of school chaplaincy program of
federal government.
Limitations on powers of majority shareholders-
The general corporation law allows the majority interest to influence by charter amendment
some alterations in the rights and powers of the shareholders. The validity of these
amendments is based on the scope of permission of statue on whether charter of corporation
was found before or after the enactment of provisions. The Corporations Act 2001 and the
common law give the security to the shareholders of the company in against of variation of
the rights of the class shares or cancellation of the rights of class shares. It also secures
shareholders against the many amendments to the requirements of the constitution of
company which have influence of taking the shares of minority shareholders or the rights
related to these shares (Ostrom, 2015). The Corporations Act 2001 also protects the
shareholders of the corporation against the changes or amendments to the particular
requirements of the constitution of company (Bainbridge, 2015).
The powers of majority shareholders of the company to change the rights or to cancel the
rights of the class shares is restricted as per the Corporations Act 2001 (Beard, 2017). The
Corporations Act 2001 renders that if constitution of corporation does not set the process for
differing and revoking the rights of the class shares then these rights can be changed,

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differed, or cancelled by the specific resolution passed at the influenced shareholder’s
meeting or with written consent of the 75% shareholders of the company. The other condition
is to set out the process for cancelling and differing the rights of the class shares then these
rights can be changes or revoked according with the process. This provision gives the chance
for the minority shareholders of closely held private corporations to involve the process in
company’s constitution, which secures the interest by considering it more complex for the
majority to alter the constitution of the company (Adams, Ezrow and Wlezien, 2016). The
case of Thomas v Mowbray [2007] HCA 33 concerned the federal constitutional legal
powers with respect to defence as well as matters of separation of powers.
The power of majority shareholders to change the constitution for the objective of taking the
shares of the minority shareholder or important powers relating to the voting right shares is
restricted considering the judgement of the Australian High Court in the case of Gambotto v
WCP Ltd. (1992) 10 ACLC. In this case, it was held by the court that an amendment to a
constitution so as to present on common authority to take the shares of the minority will only
be applicable if it is for the specific object, and it would not work unfairly or unjustly in
respect of the minority shareholders (Badgujar and Bhanage, 2015).
The minority shareholders of closely held private company’s interests are secured against
alterations to the constitution. They are not limited by the changes completed after the day on
which they make the shareholder. It needs the shareholder to take additional stakes, enhances
the obligations of the shareholder to make contribution to the corporation’s share capital, or
applies or improves the limitations on the power to transfer the shares of the shareholder,
except the shareholder gives consent in written to be restrict by the changes. The amendments
of the constitution limit the shareholders of the corporation, when the shareholders of the
corporation accept the constitution, which amends the replaceable rules. Further, there are
many replaceable rules, which may be changed to give important security to minority

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shareholders of closely held private corporations against the decision of majority, which can
have bad economic outcomes (Koschate-Fischer, Huber and Hoyer, 2016). The case of South
Australia v Totani [2010] HCA 39 concerned separation of powers in constitution of
Australia (Frederiksen and Olivares, 2017). Similarly, this term also was discussed in case of
New South Wales & Ors v Commonwealth of Australia [2006] HCA 52.
Conclusion
As per the above analysis, it can be concluded that there are some main documents of the
company, which describe the purpose of the incorporation of the company. These documents
are helpful in maintaining the better relations with the clients. They are very helpful in
running the business affairs very effectively. They establish the base, laws, rules, and the
regulations for the organisations. Thus, these documents are extremely important for the
company.

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References
Adams, J., Ezrow, L., and Wlezien, C., (2016) The company you keep: how voters infer party
positions on European integration from governing coalition arrangements. American Journal
of Political Science, 60(4), pp. 811-823.
Badgujar, K. C., and Bhanage, B. M., (2015) Factors governing dissolution process of
lignocellulosic biomass in ionic liquid: Current status, overview and challenges. Bioresource
technology, 178, pp. 2-18.
Bainbridge, S. M. (2015) The Case for Allowing Fee Shifting Bylaws as a Privately Ordered
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Beard, C. (2017) An economic interpretation of the Constitution of the United States. Oxford:
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Frederiksen, J., and Olivares, B., (2017) Coherence in the Danish Healthcare System: The
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Koschate-Fischer, N., Huber, I. V., and Hoyer, W. D. (2016) When will price increases
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Maniscalco, A. (2015) Public spaces, marketplaces, and the constitution: Shopping malls
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