Omar Bennett
A company's constitution outlines its internal rules and procedures, and it may need to be amended for a variety of reasons. For instance, a company may be required to amend its constitution due to new legislation or a court order, or it may choose to do so to reflect the current situation of the company or to anticipate future problems. To amend a company constitution, a special resolution is typically required, which involves obtaining a majority of at least 75% of the total votes cast, either through a written resolution or at a general meeting. It's important to follow the correct guidelines and procedures to ensure that the amended constitution is valid and enforceable, and to avoid any legal consequences.
| Characteristics | Values |
|---|---|
| Reasons for amendment | To reflect current company structure, to comply with new legislation, to follow a court order, to avoid future problems, or to change company type from private to public. |
| Requirements | A company constitution cannot contain a clause that restricts the ability to change it. |
| Process | Pass a special resolution with a majority of at least 75% of votes, either through a written resolution or at a general meeting. |
| Submission | Submit a copy of the special resolution, amended articles of association, and any relevant forms to Companies House within 15 days of the changes taking effect. |
| Additional Steps for Public Companies | Lodge copies of the new constitution and special resolution with ASIC within 14 days of the resolution being passed. |
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What You'll Learn
Reasons for amending a company constitution
A company's constitution contains rules on how a company can operate. It is a requirement for private companies and 'no liability' public companies to have a constitution. The constitution can be adopted before or after the company is registered.
There are many reasons why a company may need to amend its constitution. Here are some common scenarios:
- Compliance with Legal and Regulatory Requirements: A company may need to amend its constitution to comply with new legislation or regulatory directives. For example, if a change in law makes the existing structure or constitution of the company invalid or illegal, an update to the constitution would be necessary.
- Court Orders and Authority Directives: A company may be ordered to amend its constitution by a court or other regulatory authority, such as the Charity Commission. This could be due to a specific court ruling or a broader change in regulations that affects multiple companies.
- Restructuring and Organisational Changes: Amendments to the company constitution may be required when the company undergoes significant restructuring. This could include internal changes, such as reorganisation at the board and management level, or external changes, such as a group restructuring involving multiple companies.
- Clarifying Roles and Decision-Making: Ambiguities may arise when company members hold dual roles as directors and shareholders. To address this, the constitution can be amended to outline the specific decisions that can be made by directors and those reserved for shareholders, providing clarity and avoiding potential conflicts.
- Anticipating Future Problems: Amendments can be made to the constitution to anticipate and prevent potential issues. For example, including entrenchment provisions in the company's articles can provide additional protection against certain amendments being made without meeting specific conditions or procedures.
- Reflecting Current Operations: As a company evolves, its constitution may need to be updated to reflect its current operational reality. This could include changes to the company's 'objects', i.e., what the company does as a business, or updating its governing rules to align with its current structure and practices.
It is important to note that not all amendments are permitted, and there may be restrictions on certain changes. Additionally, specific procedures must be followed to ensure that any amendments are valid and enforceable.
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Rules and restrictions
The company constitution is a legal document that outlines the rules and regulations governing a company's operations, structure, and conduct. It includes information on the rights and responsibilities of directors, shareholders, and the company secretary. When amending a company constitution, it is essential to follow specific rules and procedures to ensure compliance with legal requirements. Here are some key rules and restrictions to consider:
- Articles of Association: The first step is to review the company's articles of association, which contain the rules governing the relationships between stakeholders, including shareholders, directors, and founders. These articles outline the provisions for amending the company constitution and must be followed accordingly.
- Shareholder Agreement: For private companies, changing the company's articles of association requires the agreement of the shareholders. This can be done through a resolution, which needs at least 75% of the total votes in favour of the proposed changes.
- Special Resolution: Passing a special resolution is necessary to approve amendments to the company constitution. This resolution must be passed by the company members at a general meeting or through a written resolution. The resolution outlines the changes to the constitution and ensures compliance with any applicable court orders or regulatory requirements.
- Notification and Record-Keeping: Companies must notify relevant authorities, such as Companies House in the UK or ACRA in Singapore, of any changes to their constitution. They are also required to maintain records of the amended constitution and provide copies to their members upon request.
- Legal Compliance: Amendments to the company constitution must comply with applicable laws and regulations. This includes adhering to the Companies Act and any specific legislation governing company law in the respective country or jurisdiction.
- Entrenchment Provisions: Under the CA 2006, entrenchment provisions in a company's articles can only be amended or repealed if certain stringent conditions are met. These provisions relate to the procedures and requirements for making amendments, and companies should carefully review these conditions before proceeding with any changes.
- Model Constitution: Companies that have adopted a Model Constitution, as provided in the Companies (Model Constitutions) Regulations, must adhere to any changes made to the provisions in the Model Constitution by the relevant legislative body.
- Replaceable Rules: If a company chooses to operate without a formal constitution, they can follow the replaceable rules outlined in the Corporations Act. These rules provide a basic framework for managing the company, but companies should be aware of any limitations and restrictions associated with this approach.
It is important to note that the specific rules and restrictions may vary depending on the company's jurisdiction and the applicable laws. Seeking legal advice from a qualified professional is always recommended to ensure compliance with all relevant regulations when amending a company constitution.
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Required documents
The required documents for amending a company constitution will vary depending on the jurisdiction and the specific circumstances of the company. However, here is a general overview of the documents typically needed:
Memorandum of Association and Articles of Association
The company constitution consists of these two primary constitutional documents. The Articles of Association are treated like a binding contract between all of the company's members. Amendments may be required to the Articles of Association to comply with new legislation, court orders, or instructions from regulatory authorities.
Special Resolution
To amend the company constitution, a special resolution must be passed, typically requiring a majority of at least 75% of the total votes. This can be done through a written resolution or at a general meeting. The resolution document outlines the proposed changes to the company constitution.
Notice or Statement of Compliance
Before making any changes, a company may need to issue a notice to its members. Additionally, if the company's articles are subject to provision for entrenchment, or if amendments are restricted by a court or other order, a statement of compliance must be sent in accordance with the relevant laws. This certifies that the amendment complies with the rules set out in the company's articles or any applicable orders.
Forms and Additional Documentation
Depending on the nature of the changes, additional forms and documentation may be required. For example, if the company is changing its objects (its objectives and purpose), a statement of company objects must be included. If the amendment is due to a legal instrument, a copy of that legal document must be submitted. If ordered by a court or other authority, a copy of the court order or relevant documentation must be provided.
Submission to Companies House or Relevant Regulatory Body
Within specified deadlines, typically 15 days, a copy of the special resolution, the amended articles of association, and any applicable forms must be submitted to Companies House in the UK or the equivalent regulatory body in other jurisdictions, such as ASIC in Australia. Failure to meet these deadlines can result in criminal liability and fines.
It is important to carefully review the existing company constitution and follow the correct guidelines to ensure that any amendments are valid and enforceable. Seeking legal advice is recommended to navigate the specific requirements and restrictions that may apply.
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Submission deadlines
Initial Submission of Constitution
When a company is incorporated, it must submit its initial constitution or constitutional documents to the relevant authority. In the UK, this would be Companies House, while in Australia, it would be ASIC (Australian Securities and Investment Commission). This initial submission sets the foundation for the company's governance and operations.
Deadline for Special Resolution
When amending a company constitution, a special resolution is typically required to approve the changes. This special resolution must be passed by a majority of at least 75% of the total votes cast. For publicly listed companies, a minimum notice period of 28 days is required before voting on the special resolution, while other company types may require a minimum of 21 days' notice. These deadlines ensure that all shareholders have sufficient time to review and consider the proposed changes before voting.
Submission of Amended Constitution
Once the special resolution is passed, there are deadlines for submitting the amended constitution to the relevant authority. In the UK, Companies House requires a copy of the special resolution and the amended articles of association to be submitted within 15 days. In Australia, if the amendment changes the company from a private company to a public company, the new constitution and special resolution must be lodged with ASIC within 14 days of passing the resolution. These deadlines ensure the changes are officially recorded and recognised.
Shareholder Access to Amended Constitution
After amending the constitution, companies must also provide access to the updated document for their shareholders. In Australia, companies are required to provide a current copy of the amended constitution to any shareholder who requests it within seven days of the request or payment of any applicable fees. This deadline ensures that shareholders can stay informed about the company's governance and their rights.
Court-Ordered Amendments
In some cases, a company may be ordered by a court or regulating authority to make amendments to its constitution. These orders may have specific deadlines for implementing the changes and submitting the updated documents to the relevant authorities. Companies must comply with these deadlines to avoid legal consequences.
It is important to refer to the specific laws and regulations in your jurisdiction, as well as seeking legal advice, to ensure that you meet all the necessary submission deadlines when amending your company constitution.
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Submission recipients
- Shareholders or Members: Before making any changes to the company constitution, it is crucial to obtain the approval of the shareholders or members. This is typically done through a resolution, which requires a majority vote, often set at 75%. The shareholders or members play a key role in deciding whether the proposed amendments are acceptable.
- Companies House or Regulatory Authorities: Once the resolution to amend the constitution is passed, companies often need to submit specific documentation to regulatory authorities, such as Companies House in the UK or ASIC (Australian Securities and Investments Commission) in Australia. This submission typically includes a copy of the resolution, the amended articles of association or new constitution, and any relevant forms or statements of compliance. Deadlines for these submissions are usually strict and may carry legal consequences if not met.
- Court or Legal Authorities: In some cases, amendments to a company constitution may be ordered by a court or legal authority. This could be due to legal requirements, regulatory changes, or court decisions. The company may need to submit documentation outlining the changes and ensuring compliance with the court's instructions.
- Funders or Lenders: If the company is entering into or considering arrangements with funders or lenders, they may be recipients of submissions regarding amendments to the company constitution. This is particularly relevant if the funders or lenders have specific requirements or need to understand the company's updated governing rules.
- Internal Departments: Amendments to the company constitution may also involve submissions to various internal departments within the organisation. For example, the legal, compliance, or secretarial departments may need to review and approve the changes to ensure they comply with legal and regulatory frameworks.
- External Legal Services: While not mandatory, companies often engage external legal services to guide them through the process of amending a company constitution. These legal service providers can assist in drafting, reviewing, and submitting the necessary documentation to ensure compliance and effectiveness.
It is important to note that the specific submission recipients may vary based on the company's jurisdiction, industry, and unique circumstances. It is always advisable to seek legal advice and refer to the relevant regulatory frameworks when navigating the process of amending a company constitution.
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Frequently asked questions
A company constitution is a document that outlines the rules and procedures of a company. It is a binding contract between all of the company's members and consists of two primary documents: the memorandum of association and the company's articles of association.
You can amend your company constitution for a variety of reasons. This may include situations where new legislation makes your existing constitution illegal, or a court or regulatory authority instructs you to change it. You may also amend your constitution to reflect the current situation of your company or to anticipate future problems.
To amend your company constitution, you will typically need shareholder approval in the form of a special resolution. This requires a majority of at least 75% of the total votes and can be passed through a written resolution or at a general meeting.
Once the special resolution is passed, you must submit a copy of the resolution, along with the amended articles of association and any relevant forms, to the appropriate authority, typically the Companies House or ASIC (Australian Securities and Investment Commission). These must be submitted within specified deadlines, usually within 15 days of the changes taking effect.
Yes, it's important to note that not all amendments are allowed. Certain provisions within the existing constitution may outline specific requirements or restrictions on how it can be amended. Additionally, in some cases, entrenchment may occur when a court or other authority prohibits or requires certain amendments. Always review the existing constitution and ensure compliance with any applicable laws or orders.
