Company rules and constitutions
Key points:
- Your company must be governed by either a constitution or a set of rules called the ‘replaceable rules’.
- If you want to change some or all of the replaceable rules, your company must have a constitution.
- The company can use some or all of the replaceable rules in its constitution.
- The replaceable rules are in the Corporations Act 2001.
- No matter what you choose, you and the company must follow all the other laws and rules in the Corporations Act.
Using the replaceable rules
Using the replaceable rules can be an easy way to manage a proprietary company.
The replaceable rules are the default option for proprietary companies in Australia. If you use all of them, you do not need a constitution. Some public companies can also use the replaceable rules.
What the replaceable rules cover
Topics covered by the replaceable rules include:
- company officers and employees
- ways to access the company books
- directors’ and shareholders’ meetings
- shares and dividends.
Read all the replaceable rules for company governance.
The replaceable rules do not apply to a proprietary company with a sole director who is also the sole shareholder. There are some special rules for these types of companies. See section 135(1) of the Corporations Act 2001.
Using a constitution
A constitution is a contract between a company and its members (shareholders), directors and secretary. It is also a contract between the shareholders. It explains how the company will be internally managed.
You can have a constitution that suits your company. You can choose to use all, some or none of the replaceable rules.
What a constitution should cover
A company constitution should explain rules for:
- company governance
- who can do what within the company
- meetings for directors and members
- shares and dividends
- other matters important to your company.
You may need legal help to write a company constitution.
Companies that must have a constitution
If you do not want your company to use all of the replaceable rules or if you want to change part of a replaceable rule, your company must have a constitution. If the constitution does not address a topic covered by a replaceable rule, the replaceable rule applies.
There are also specific types of companies that cannot use the replaceable rules and must have a constitution. They are:
- no liability public companies
- special purpose companies that want a reduced annual fee.
Next steps
Find out how to adopt or change a company constitution, if you need one: