The pillars of governance: Exploring the indispensable need for a company constitution
A constitution is a legal document that sets out the rules and regulations governing a company's operations.
A constitution is essential if the company has 2 directors. This is because s 9 of the Property Law Act 2007 requires deeds to be executed as follows::
When a body corporate has a single director, the deed must be signed by that director, whose signature must be witnessed.
In the case where a body corporate has two or more directors, the deed is validly executed if at least two directors sign it. Witness signatures are not required.
Problems arise if a company has two directors. In that case under s 9(3)(iii)) of the Property Law Act 2007, both directors must sign any deed, unless the company has a constitution that permits a deed to be signed by “1 director or other person or member of a specified class of person.” If the constitution authorises a deed to be signed in that way, the signature must be witnessed. Our company constitutions provide that flexibility.
Unless the constitution provides that flexibility if 1 of the 2 directors is overseas, ill, or on holiday the company cannot sign any deed.
Clarifying Purpose and Vision: A constitution can help clarify the purpose and vision of a company. It can set out the company's objectives, define its values, and outline the scope of its activities. This can help ensure that everyone involved in the company is working towards the same goals and can reduce misunderstandings and conflicts.
Establishing Roles and Responsibilities: A constitution can establish the roles and responsibilities of the company's directors, shareholders, and officers. This can help ensure that everyone understands their duties and obligations and can help prevent disputes and legal issues.
Protecting Shareholders: A constitution can provide protection for shareholders by setting out their rights and obligations. It can also establish mechanisms for resolving disputes and can help ensure that shareholders are treated fairly and equitably.
Providing Flexibility: A constitution can provide a company with flexibility in how it operates. It can be tailored to meet the specific needs of the company and can be amended as required to reflect changes in the business environment.
Overall, a constitution can provide a framework for the effective and efficient management of a company and can help ensure that it operates in compliance with legal requirements while achieving its goals and objectives.
Start your DYOdocs company constitution with associated minutes for $115.00 including GST.
