The constitution of company is the base of an organization. The constitution can be amended with necessary requirements. In the absence of these requirements, the constitution cannot be amended. There are also some limitations on powers of majority shareholders in respect of the variations of the rights of the members of company. The governing document includes Bylaws and Articles of the company.
In this report, the requirements of amendment of the constitution, purpose of governing document and limitations on the powers of majority shareholders are discussed.
The governing document of the registered company mean the Bylaws of company and the Articles of company and company certificate. The registered company is in the agreement with the terms of the governing documents of the company. The governing document of the registered company under the Corporations Act (2001) states objectives or purposes of the company. The governing document of the registered company addresses that how it is to be administered. The governing document comprises all the details required to run the company such as objects of the formation of company, powers of the company and members of the company, the authorities of the company such as the directors, BOD, management, and administrative department. The governing document of the company also states that how the operations or business affairs are to be run. It also specifies the circumstances or conditions when the company is required to be terminated.
The Articles of the registered company develop the legal base of the company. The company Bylaws state the internal rules related to the internal management of the company. In case of ASIC v Rich (2009) 75 ACSR 1, the judgement redrew judgement rule. The article discuss judgement rule. The company Bylaws also develop the rules related to management, which give uniformity, stability, and permanence of business operations for the assurance of those both in the company and out of the company. The company Bylaws describe the connection between the organization and the members of an organisation and among the members of the company themselves. The best bylaws reduce the probability of uncertainty and variance on the framework and the operations of business. The Bylaws include provisions of bylaws such as name of the company, objects of the company, qualification of members, qualification of various classes of membership, fiscal policies, framework of dues, name of officers, powers of the officers, duties of officers and rules related to filling vacancies. They also define the meaning of the position of chief staff officer, schedules related to the meeting, details of the committees, process of amendments, and dissolution procedure (Riggs, 2017).
The constitution of company is very essential document. It comprises the rules, regulations, guidelines, and laws of the corporation. Many examples of subjects are set out in the constitution of company such as rights of these shares, requirement of quorum to held the meeting of shareholders, procedure to appoint directors of company and process to remove directors of the company (Talbot, 2015).
The constitution of company can be amended due to certain reasons. These reasons may include the alteration of way of appointment of directors, alteration of the way of removal of directors, to add the pre-emption rights for the new issue of shares or transfer of shares, and to remove the pre-emption rights for the new shares or transfer of shares. The constitution of company may amend to create the new share classes like preference shares and alphabet shares such as class A shares or class B shares. The constitution of company can also be amended to compliance with statutory requirements or the regulatory requirements such as to comply with the Professional Engineers Act. In case of confliction with external documentation, the constitution of company is also required to be amended (Plieninger, et. Al, 2015). In case of The Commonwealth v Australian Capital Territory [2013] HCA 55, it was held by the court that the constitutional power of federal parliament to make law of marriage extends to same sex marriage.
Usually, the amendment of constitution needs an approval of 75% shareholders or approval of supermajority of shareholders. More severe provisions can also apply in many cases. It all depends on personal circumstances of the company. In some cases, approval of unanimous shareholders or 100% shareholders is required because of the language of current constitution or agreement of shareholders. For the amendment of the constitution of company, notice of at least 14 days should be provided to the shareholders of the corporation for conducting the extra general meeting (EGM). This period of notice may avoided or evaded if the shareholders provide their consent to the shorter notice as per the section 177 (3) of the Companies Act (Labbe, 2017).
At general meeting, the amendments to amend the constitution will be offered as the special resolution. It is required approval of minimum 75% shareholders to pass. The percentage of the approval of shareholders is depended on the constitution of the company. When special resolution is passed, it is required to amend the constitution. It is also required to update the constitution by the company secretary of company to show these alterations and in fourteen days of passing resolution lodge with the Accounting and Corporate Regulatory Authority of Singapore (ACRA) a copy of this purpose along with a copy of the constitution as accepted or modified (Lee and Kawachi, 2017).
For the amendment of the object of company, there are many complications. The amending the object of constitution is more difficult than the amending the other provisions of constitution. It is also required the notice of 21 days and cool down period after making the specific resolution (Lowry and Dignam, 2016). This longer notice of 21 days for EGM to arrange to make the amendments in the object the constitution should be in writing-
There are also many alternatives to amend the constitution. Some shareholders can prefer to maintain requirements confidential by making private agreement. This private agreement is referred as an agreement of shareholders. The shareholders agreement is made between shareholders and the company. Due to the importance of amendments of the constitution, the minority shareholders are seen severely negotiating for them when shareholder agreement is considered. The rights of minority shareholders should be legally enforceable otherwise, their purpose may defeat (McLaughlin, 2018).
As the constitution amounts to a legal contract between the corporation and the members or among the members, the members otherwise known as shareholders may take the action to apply the requirements and provisions of the constitution. The corporation also has the authority to take actions. In this way, the company may take the actions to force the members of the company to conform to the provisions of the constitution. These rights of taking actions are not given to the third person or a person who is not member. Thus, in making or amending the company’s constitution, it is critical to deliberate the outcomes it can have in restricting the activities as the owner of business or the shareholders and those of other stakeholders and corporation in common (Njie, 2016).
In the given case Plaintiff S4/2014 [2014] v Minister for Immigration and Border Protection HCA 34, it was held by the High Court that there are some constitutional limits on immigration detention. The case of Williams v Commonwealth of Australia & Ors [2012] HCA 23 concerned the constitutional rationality of school chaplaincy program of federal government.
The general corporation law allows the majority interest to influence by charter amendment some alterations in the rights and powers of the shareholders. The validity of these amendments is based on the scope of permission of statue on whether charter of corporation was found before or after the enactment of provisions. The Corporations Act 2001 and the common law give the security to the shareholders of the company in against of variation of the rights of the class shares or cancellation of the rights of class shares. It also secures shareholders against the many amendments to the requirements of the constitution of company which have influence of taking the shares of minority shareholders or the rights related to these shares (Ostrom, 2015). The Corporations Act 2001 also protects the shareholders of the corporation against the changes or amendments to the particular requirements of the constitution of company (Bainbridge, 2015).
The powers of majority shareholders of the company to change the rights or to cancel the rights of the class shares is restricted as per the Corporations Act 2001 (Beard, 2017). The Corporations Act 2001 renders that if constitution of corporation does not set the process for differing and revoking the rights of the class shares then these rights can be changed, differed, or cancelled by the specific resolution passed at the influenced shareholder’s meeting or with written consent of the 75% shareholders of the company. The other condition is to set out the process for cancelling and differing the rights of the class shares then these rights can be changes or revoked according with the process. This provision gives the chance for the minority shareholders of closely held private corporations to involve the process in company’s constitution, which secures the interest by considering it more complex for the majority to alter the constitution of the company (Adams, Ezrow and Wlezien, 2016). The case of Thomas v Mowbray [2007] HCA 33 concerned the federal constitutional legal powers with respect to defence as well as matters of separation of powers.
The power of majority shareholders to change the constitution for the objective of taking the shares of the minority shareholder or important powers relating to the voting right shares is restricted considering the judgement of the Australian High Court in the case of Gambotto v WCP Ltd. (1992) 10 ACLC. In this case, it was held by the court that an amendment to a constitution so as to present on common authority to take the shares of the minority will only be applicable if it is for the specific object, and it would not work unfairly or unjustly in respect of the minority shareholders (Badgujar and Bhanage, 2015).
The minority shareholders of closely held private company’s interests are secured against alterations to the constitution. They are not limited by the changes completed after the day on which they make the shareholder. It needs the shareholder to take additional stakes, enhances the obligations of the shareholder to make contribution to the corporation’s share capital, or applies or improves the limitations on the power to transfer the shares of the shareholder, except the shareholder gives consent in written to be restrict by the changes. The amendments of the constitution limit the shareholders of the corporation, when the shareholders of the corporation accept the constitution, which amends the replaceable rules. Further, there are many replaceable rules, which may be changed to give important security to minority shareholders of closely held private corporations against the decision of majority, which can have bad economic outcomes (Koschate-Fischer, Huber and Hoyer, 2016). The case of South Australia v Totani [2010] HCA 39 concerned separation of powers in constitution of Australia (Frederiksen and Olivares, 2017). Similarly, this term also was discussed in case of New South Wales & Ors v Commonwealth of Australia [2006] HCA 52.
Conclusion
As per the above analysis, it can be concluded that there are some main documents of the company, which describe the purpose of the incorporation of the company. These documents are helpful in maintaining the better relations with the clients. They are very helpful in running the business affairs very effectively. They establish the base, laws, rules, and the regulations for the organisations. Thus, these documents are extremely important for the company.
References
Adams, J., Ezrow, L., and Wlezien, C., (2016) The company you keep: how voters infer party positions on European integration from governing coalition arrangements. American Journal of Political Science, 60(4), pp. 811-823.
Badgujar, K. C., and Bhanage, B. M., (2015) Factors governing dissolution process of lignocellulosic biomass in ionic liquid: Current status, overview and challenges. Bioresource technology, 178, pp. 2-18.
Bainbridge, S. M. (2015) The Case for Allowing Fee Shifting Bylaws as a Privately Ordered Solution to the Shareholder Litigation Epidemic. JL, 5(1), p. 105.
Beard, C. (2017) An economic interpretation of the Constitution of the United States. Oxford: Routledge.
Frederiksen, J., and Olivares, B., (2017) Coherence in the Danish Healthcare System: The Endeavour of Governing Healthcare. praktiske grunde, 38(5), p. 21.
Koschate-Fischer, N., Huber, I. V., and Hoyer, W. D. (2016) When will price increases associated with company donations to charity be perceived as fair?. Journal of the Academy of Marketing Science, 44(5), pp. 608-626.
Labbe, A. (2017) Proxy access bylaws face uncertainty in Canada. International Financial Law Review, 45(6).
Lee, M. A., and Kawachi, I. (2017) The company you keep: Is socialising with higher?status people bad for mental health?. Sociology of health & illness, 39(7), pp. 1206-1226.
Lowry, J. P., and Dignam, A. (2016) Company law. Oxford: Oxford University Press.
Maniscalco, A. (2015) Public spaces, marketplaces, and the constitution: Shopping malls and the first amendment. New York: Suny Press.
McLaughlin, S. (2018) Unlocking company law. Oxford: Routledge.
Njie, L. (2016) Challenges to governing sustainable forest food: Irvingia spp. from southern Cameroon. Forest policy and economics, 35(7), pp. 45-51.
Ostrom, E., (2015) Governing the commons. Cambridge: Cambridge university press.
Plieninger, T., Kizos, T., Bieling, C., Le Du-Blayo, L., Budniok, M. A., Burgi, M., Crumley, C.L., Girod, G., Howard, P., Kolen, J., and Kuemmerle, T. (2015) Exploring ecosystem-change and society through a landscape lens: recent progress in European landscape research. Ecology and Society, 20(2).
Riggs, R. (2017) Governing Cambodia’s Forests: The International Politics of Policy Reform. International Forestry Review, 19(2), pp. 245-247.
Talbot, L. (2015) Critical company law. Oxford: Routledge.
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