Does our company need to have a Constitution or can we use the Replaceable Rules in the Corporations Act?

Which companies need a Constitution?

The following companies must be governed by a Constitution:

⚖️ 'No Liability' public companies; and

⚖️ 'Special Purpose Companies' seeking a reduced Annual ASIC Review Fee.

A proprietary company (that is also a Special Purpose Company) must have a Constitution.  

Public Company Constitution Changes

A Public Company must lodge a special resolution adopting, modifying or repealing its Constitution with ASIC within 14 days after it is passed, together with:

(a) if the company adopts a Constitution – a copy of the constitution; or

(b) if the company modifies its Constitution – a copy of the modification.

The penalty for failure to lodge with ASIC

The maximum penalty for the offence of failing to lodge the above with ASIC is:

❌ 20 penalty units (a Commonwealth penalty unit is currently $210).

Note: Maximum penalties are reserved for the most serious cases.

What is a special purpose company?

A 'special purpose company' is generally one that's created for a set reason, not just general business.

Special purpose companies are usually one of the following:

Superannuation Trustee Company

A superannuation trustee company acts solely as a trustee of a regulated superannuation fund.

Refer to s19 of the Superannuation Industry (Supervision) Act 1993 for more information.

The company's Constitution must prohibit the company from distributing income or property to its members.

Home Unit Company

This type involves a group of people (directors or members) who own or live in a block of flats or units.

The company exists as a body corporate to administer the property.

Only proprietary companies can be home unit companies.

Not-for-profit Company

This company is for charitable purposes only.

The Constitution requires the company to:

✅ Apply its income in promoting charitable purposes;

❌ Prohibit distributions to its members and paying fees to its directors, and

✅ Make its directors approve all other payments the company makes to them.

In each case, the company's Constitution must meet the requirements under the Corporations (Review Fees) Regulations 2003.

Does the special purpose company constitution need to be lodged with ASIC?

The special purpose company Constitution does not need to be lodged with ASIC, but a copy must be kept with the company's records.

How can shareholders obtain a copy of the constitution?

A company must provide a current copy of the Constitution to any member who requests it within 7 days.

If a fee is charged, the Constitution must be provided within 7 days of payment.

Replaceable rules

Replaceable rules are in the Corporations Act and are a basic set of rules for managing your company.

If a company doesn't want to have a Constitution, they can use the replaceable rules instead.

It is also possible for a company to be governed by a combination of a Constitution supplemented by the replaceable rules.

Replaceable rules do not apply to a proprietary company if the same person is the sole director as well as the sole shareholder.

Replaceable rules provide for the rules outlined in the Corporations Act and which section they're in.

The content in each of those sections applies as the replaceable rule. 

If a company wants to change or remove a replaceable rule, they will need to adopt a Constitution that outlines the changes.

Credits:

This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.