Company must-haves: a Constitution and company register

It is important to be aware of the mandatory records companies must create and maintain, and to understand the advantages of a company Constitution over the replaceable rules under the Corporations Act 2001 (Cth) (Act).

Sharee Darwinkel, Maddocks Lawyers

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Why a Constitution is preferable to the replaceable rules

A company's internal management can be governed by either a company Constitution or the replaceable rules in the Act. The replaceable rules are not mandatory, and can be excluded by a Constitution.

Issues

The replaceable rules do not apply to all companies, including:

• proprietary companies where the one person is the sole director and sole member;
• special purpose companies that want to obtain the reduced annual ASIC review fee;
• no liability public companies; and
• public companies limited by guarantee that wish to omit the word 'limited' from their name.

These companies should adopt a Constitution on registration.

The replaceable rules provide a minimum set of governing rules for a company only. They do not cover all aspects of a company's management. Rather, they are a series of brief provisions which do not provide the specificity of a Constitution.

Companies that adopt the replaceable rules must ensure they always refer to the most current version of the Act: this is because if the relevant provisions of the legislation are amended, then the rules governing the company change at that time.

Solution

A Constitution provides shareholders with peace of mind that a properly calibrated set of rules governs the management of the company, and cannot be amended except in accordance with the Act.

When incorporating a company through Cleardocs, you are provided with a Constitution, which provides broader and more specific rules than the replaceable rules, for instance in relation to:

• pre-emptive share rights for all share classes — which confer important rights on existing shareholders;
• share valuations — which provide a measure of certainty when shares change hands, in the event the parties cannot agree;
• share forfeitures — which apply in the event that shareholders with partly-paid share do not pay calls on their shares;
• capitalising company profits and carrying profits forward;
• voting rights — which may differ depending on different classes of shares;
• place for a directors meeting — which allows for directors to hold meetings at different locations and provides rules where there is a failure in technology; and
• default provisions governing the unintended consequences of Division 7A loans.

Company registers

When a company is registered, the Act also requires the following documents:

• signed office holder consents;
• signed applications for shares from the members;
• share certificates;
• signed consents to use the registered office, if the company does not usually occupy those premises; and
• member registers.

These documents should be kept and maintained in the company register, which must be stored at the company's registered address.

When registering a company through Cleardocs, you will be provided with a company register which has been drafted by Maddocks lawyers and fully complies with the Act's requirements.

If you register a company directly with ASIC you will be required to provide your own company register and should ensure it complies with the Act. If you are unsure, you should obtain legal advice.

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 related topics.

Order Cleardocs packages

• Register a Company
• Registered Company documents only
• Shareholders Agreement
• Change to Constitution
• Sole Director Package
• Company Minutes & Resolutions Package