#7400 - The Corporate Constitution And Decision Making By The Board Of Directors - Business Associations I

Class 4: The Corporate Constitution and Decision Making by the Board of Directors

Corporations Act ss 134-141. Pay particular attention to the Table of replaceable rules in s 141.

CORPORATIONS ACT 2001 - SECT 134

Internal management of companies

A company's internal management may be governed by provisions of this Act that apply to the company as replaceable rules, by a constitution or by a combination of both.

Note: There are additional rules about internal management in ordinary provisions of this Act and also in the common law.

CORPORATIONS ACT 2001 - SECT 135

Replaceable rules

Companies to which replaceable rules apply

(1) A section or subsection(except subsection 129(1), this section and sections140 and 141) whose heading contains the words:

(a) replaceable rule --applies as a replaceable rule to:

(i) each company that is or was registered after 1July 1998; and

(ii) any company registered before 1July 1998 that repeals or repealed its constitution after that day; and

(b) replaceable rule for proprietary companies and mandatory rule for public companies --applies:

(i) as a replaceable rule to any proprietary company that is or was registered after 1July 1998; and

(ii) as a replaceable rule to any company that is or eas registered after 1July 1998 and that changes or changed to a proprietary company (but only while it is a proprietary company); and

(iii) as a replaceable rule to any proprietary company that is or was registered before 1July 1998 that repeals or repealed its constitution after that day; and

(iv) as an ordinary provision of this Act to any public company whenever registered.

The section or subsection does not apply to a proprietary company while the same person is both its sole director and sole shareholder.

Note 1: See sections198E, 201F and 202C for the special provisions that apply to a proprietary company while the same person is both its sole director and sole shareholder.

Note 2: A company may include in its constitution (by reference or otherwise) a replaceable rule that does not otherwise apply to it.

Company's constitution can displace or modify replaceable rules

(2) A provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company's constitution.

Failure to comply with replaceable rules

(3) A failure to comply with the replaceable rules as they apply to a company is not of itself a contravention of this Act (so the provisions about criminal liability, civil liability and injunctions do not apply).

Note: Replaceable rules that apply to a company have effect as a contract (see section140).

CORPORATIONS ACT 2001 - SECT 136

Constitution of a company

(1) A company adopts a constitution:

(a) on registration--if each person specified in the application for the company's registration as a person who consents to become a member agrees in writing to the terms of a constitution before the application is lodged; or

(b) after registration--if the company passes a special resolution adopting a constitution or a court order is made under section233 that requires the company to adopt the constitution.

Note: The Life Insurance Act 1995 has rules about how benefit fund rules become part of a company's constitution and about amending those rules. They override this Act (see section1348 of this Act). Consequential amendments to the rest of the company's constitution can be made under that Act or this Act (see Subdivision2 of Division4 of Part2A of that Act).

(2) The company may modify or repeal its constitution, or a provision of its constitution, by special resolution.

Note: The company may need leave of the Court to modify or repeal its constitution if it was adopted as the result of a Court order (see subsection 233(3)).

(3) The company's constitution may provide that the special resolution does not have any effect unless a further requirement specified in the constitution relating to that modification or repeal has been complied with.

(4) Unless the constitution provides otherwise, the company may modify or repeal a further requirement described in subsection(3) only if the further requirement is itself complied with.

(5) A public company must lodge with ASIC a copy of a special resolution adopting, modifying or repealing its constitution within 14 days after it is passed. The company must also lodge with ASIC within that period:

(a) if the company adopts a constitution--a copy of that constitution; or

(b) if the company modifies its constitution--a copy of that modification.

This also applies to a proprietary company that has applied under Part2B.7 to change to a public company, while its application has not yet been determined.

(6) An offence based on subsection(5) is an offence of strict liability.

Note: For strict liability , see section6.1 of the Criminal Code .

CORPORATIONS ACT 2001 - SECT 137

Date of effect of adoption, modification or repeal of constitution

If a new constitution is adopted or an existing constitution is modified or repealed, that adoption, modification or repeal takes effect:

(a) if it is the result of a special resolution:

(i) on the date on which the resolution is passed if it specified no later date; or

(ii) on a date specified in, or determined in accordance with, the resolution if the relevant date is later than the date on which the resolution is passed; or

(b) if it is the result of a Court order made under section233:

(i) on the date on which the order is made if it specifies no later date; or

(ii) on a date specified by the order.

CORPORATIONS ACT 2001 - SECT 138

ASIC may direct company to lodge consolidated constitution

ASIC may direct a company to lodge a consolidated copy of its constitution with ASIC.

CORPORATIONS ACT 2001 - SECT 139

Company must send copy of constitution to member

(1) A company must send a copy of its constitution to a member of the company within 7 days if the member:

(a) asks the company, in writing, for the copy; and

(b) pays any fee (up to the prescribed amount) required by the company.

(2) An offence based on subsection(1) is an offence of strict liability.

Note: For strict liability , see section6.1 of the Criminal Code .

CORPORATIONS ACT 2001 - SECT 140

Effect of constitution and replaceable rules

(1) A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract:

(a) between the company and each member; and

(b) between the company and each director and company secretary; and

(c) between a member and each other member;

under which each person agrees to observe and perform the constitution and rules so far as they apply to that person.

(2) Unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution made after the date on which they became a member so far as the modification:

(a) requires the member to take up additional shares; or

(b) increases the member's liability to contribute to the share capital of, or otherwise to pay money to, the company; or

(c) imposes or increases restrictions on the right to transfer the shares already held by the member, unless the modification is made:

(i) in connection with the company's change from a public company to a proprietary company under Part2B.7; or

(ii) to insert proportional takeover approval provisions into the company's constitution.

CORPORATIONS ACT 2001 - SECT 141

Table of replaceable rules

The following table sets out the provisions of this Act that apply as replaceable rules.