In the absence of other documentation, a company is governed by the legal requirements of the Companies Act. This Act provides statutory rules for how directors can make decisions, what the rights of shareholders are and other such administrative management. However, a company may wish to create its own set of rules and to do so a constitution is one of the steps it can take. A constitution is a formalised agreement between the shareholders and directors which will deal with a variety of governance issues for the company. It is registered with the Companies Office and becomes a public record, so that third parties can identify where different rules may apply to the running of the company. The constitution can cover things such as the following, when the standard Companies Act rules are not suitable to the company in question:

  • How the board of directors votes
  • What distribution/dividend policy the company may have
  • Pre-emptive rights for shareholders if some shareholders wish to sell their shares
  • Financing requirements and restrictions on the company.

Prudentia Law can assist you with implementing basic constitutional documents which can come in precedent format, or we can assist with tailoring the shareholders and directors requirements into specific constitutional rules. Contact us if you would like our help in this area.