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Company constitution & replaceable rules in Australia.

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Updated July 13, 2021
Company constitution & replaceable rules in Australia

This is a guide about the company constitution and replaceable rules in Australia.

The company constitution and replaceable rules govern the control and management of a business. While the constitution is a contract between members parties within the company, the replaceable rules are rules set out in the Corporations Act.

Let’s find out more.

Company constitution

What is a company constitution?

According to ASIC, a constitution is a contract between:

  • The company and each member
  • The company and each director
  • The company and the company secretary
  • A member and each other member

This document generally guides how meetings are run (both board meetings and members meetings), as well as a host of other procedural governance items.

What should the constitution cover?

The constitution should cover the following clauses:

  • The company’s structure
  • objectives
  • The issuance and transfer of shares
  • Share certificates
  • Procedures for conducting meetings
  • Voting procedures
  • The appointment, removal and power of directors
  • Rules regarding paying dividends
  • Income and property of the company
  • Inspections of records
  • Audit
  • Company secretary
  • Dissolution and winding up
  • Adoption and amendment of the constitution

When to adopt a constitution?

A company may adopt a constitution either before or after registration.

If the company adopts a constitution before the company registration, each member must agree in writing to the terms of the constitution.

To adopt a constitution after the registration, the company must pass a special resolution (approval from at least 75% of shareholders with voting rights).

What companies require a constitution?

The following companies must have a constitution:

  • No liability public companies
  • Special purpose company

If your company is registered with the Australian Securities and Investment Commission (ASIC), you can choose one of the following:

  • Establish a constitution specifying all the rules
  • Be governed by replaceable rules
  • Adopt a combination of the constitution and replaceable rules

Changing the constitution

A company’s constitution can be changed or repealed by passing a special resolution.

A publicly listed company must give at least 28 days’ notice of the meeting, and other companies must give at least 21 days’ notice. The notice must include the time, date and place of the meeting, topics to be discussed and the intention to pass the resolution.

For the resolution to be passed, at least 75% of the voting rights must be in favour of the change.

A proxy can be appointed to vote for members who cannot attend the meeting on their behalf.

Once the special resolution to change the constitution has passed, a private company must keep a copy of the constitution with the company’s records and provide a copy to any member who requests it within seven days.

Replaceable rules

What are the replaceable rules?

If a company does not adopt a constitution, it can use the replaceable rules instead.

Replaceable rules appear in the Corporations Act and provide basic rules for governing a company.

What companies can have replaceable rules?

Both private and public companies in Australia can have replaceable rules. However, replaceable rules do not apply where a company’s sole director and sole shareholder is the same person.

Which matters do the replaceable rules cover?

Section 141 of the Corporations Act sets out 39 provisions that apply to the replaceable rules:

1Officers and employeesVoting and completion of transactions – directors or proprietary companies
2Power of directors
3Negotiable instruments
4Managing director
5Company may appoint a director
6Directors may appoint ither directors
7Appointment of managing directors
8Alternate directors
9Remuneration of directors
10Director may resign by giving written notice to company
11Removal by members – proprietary company
12Termination of appointment of managing director
13Terms and conditions of office for secretaries
14Inspection of booksCompany or directors may allow member to inspect books
15Director’s meetingCirculating resolutions of companies with more than one director
16Calling directors’ meetings
17Chairing directors’ meetings
18Quorum at directors’ meetings
19Passing of directors’ resolutions
20Meeting of memberCalling of meetings of members by a director
21Notice to joint members
22When notice by post or fax is given
23Notice of adjourned meetings
25Charing meetings of members
26Business at adjourned meetings
27Who can appoint a proxy (only for proprietary companies)
28Proxy vote valid even if member dies, revokes appointment etc.
29How many votes a member has
30Jointly held shares
31Objections to right to vote
32How voting is carried out
33When and how polls must be taken
34Shares(a) Pre-emption for existing shareholders on issue of shares in proprietary company
35(b) other provisions about paying dividends
36Dividend rights for shares in proprietary companies
37Transfer of sharesTransmission of shares on death
38Transmission of shares on bankruptcy
39Transmission of shares on mental incapacity
40Registration of transfers
41Additional general discretion for directors of proprietary companies to refuse to register transfers

Changing the replaceable rules to a constitution

Replaceable rules may be applied at the initial stages of your company or if you do not have time or resources to draft a constitution.

Your company can change the replaceable rules to a constitution in the future by passing a special resolution.

Notice must be given at least 21 days for private companies or 28 days for public companies.

The change must be approved by all members of the company and in good faith.

Constitution vs replaceable rules

Replaceable rules are simple and cost-effective and can be used when the business has just been incorporated. However, not all businesses are eligible to adopt the replaceable rules.

A constitution is more flexible and can be tailored to meet the needs of your company. It also combines the rules in one place, rather than referring to the different sections in the Corporations Act.


Companies in Australia must adopt either a company constitution or replaceable rules. Each set of rules have its advantages and disadvantages; therefore, you should verify which set your entity can apply. For more information, feel free to schedule a consultation with Acclime.

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About Acclime.

Acclime helps established multinational companies and startups start and operate their business in Australia and beyond. By seamlessly navigating our clients through the complexities of the local regulatory systems, we maximise opportunities while ensuring compliance.

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