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Keep it simple – should you update your company Constitution?

With changing law and changing technology, it is important that a company's founding document – its Constitution – continues to be compliant, meets the requirements of its daily activities and is written in plain language. Cleardocs has recently undertaken a simplification of its existing Company Constitution product. To mark the release of this product, this article outlines the benefits that a simple Constitution can offer.

Melissa Ramov, Maddocks Lawyers

Why have a current and simple Constitution?

  • Remove unnecessary restrictions: the sections of a Constitution which deal with the ability to declare and pay dividends are informed by section 254T of the Corporations Act 2001 (Cth). Section 254T was last changed on 28 June 2010 to:
    • remove the requirement for a company to pay dividends only out of its 'profits'; and
    • allow a company to pay dividends out of net assets, provided the interests of creditors and shareholders are protected.

    The Cleardocs Constitution was updated when this change was first introduced. However, companies which have not updated their Constitutions since 2010 are likely to have an unnecessary restriction on the declaration of dividends remaining.

  • Shorter and simpler: in line with Cleardocs' plain language approach and customer feedback, Maddocks has assisted Cleardocs to prepare a Constitution which is shorter in length – resulting in a simpler yet compliant master document.
  • Modern practice: to reflect current board practices and reliance on technology, a Constitution should enable notices to be delivered online and delivery times should be consistent with Australia Post delivery times.

What changes has Cleardocs made recently?

  • Compliance – General update of references to legislation to comply with changes in the law;
  • Modernisation – reflecting current board practice and use of technology, the Constitution now specifies that boards can deliver meeting notices to members through an online platform;
  • Relevance – removal of underused sections of the Constitution to better reflect current corporate practices and to reflect customers’ frequently asked questions;
  • Same extras – the new simplified Constitution retains the Division 7A Loan Agreement as an annexure to the document, enabling companies to record loans from the company to its members. Ideally, Division 7A Loan Agreements should be in place in time for declaration of dividends and lodgement of tax returns.

The simplified Company Constitution product will be offered by Cleardocs from early April 2018.

More information from Maddocks

For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Commercial team.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of company registration topics.

Order Cleardocs Company Registration document packages


Lawyer in Profile

Jack Coventry
Jack Coventry
Senior Associate
+61 3 9258 3819

Qualifications: BA (Philosophy), Monash University, JD (Juris Doctor), University of Melbourne

Jack is a member of Maddocks Commercial team. He advises a range of corporate and private clients on:

  • M&A transactions,
  • corporate reorganisations, and
  • legal and tax structuring.

Jack acts for clients on both buy-side and sell-side and specialises in founder-owned businesses and Australian subsidiaries of multi-national companies. He works across a number of sectors including information technology, professional services, and property development and management including land lease.

Jack’s structuring work includes assisting multinationals to structure Australian operations, listed companies to achieve regulatory compliance / optimisation and providing general tax structuring. He has also represented clients in tax controversies including before the General Anti-Avoidance Review Panel (GAAR Panel) and the Federal Court of Australia.

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