Constitution and replaceable rules

A company’s internal management may be governed by:

  • provisions of the Corporations Act 2001 (the Corporations Act) that apply to the company - known as replaceable rules;
  • a Constitution; or
  • a combination of both (s135 and 136).

(Replaceable rules outlined contains a detailed listing of the text of the rules). Replaceable rules do not apply to proprietary companies where the one person is the sole director and sole member, although a constitution may be adopted.

If your company is registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC) some of your reporting obligations to ASIC will no longer apply. See here for details.

The following companies must be governed by a constitution:

  • public companies 'Limited by Guarantee' who are applying to omit the word Limited from their name under section 150;
  • 'No Liability' public companies under s112;
  • 'special purpose companies' that want to obtain the reduced annual review fee under item 103 of the Corporations (Review Fees) Regulations 2003.

The Constitution for most companies is drawn up prior to the registration of the company. The Constitution has the effect of 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.

A company must provide an up-to-date copy of the Constitution (s139) to any member who requests it within 7 days (or within 7 days of the fee being paid if a fee up to the prescribed amount set out in the Corporations Regulations 2001 (the Regulations) (reg 1.1.01), is charged).

It is not necessary to lodge the Constitution of a proprietary company (not being an unlimited company) with the application for registration but they must be kept with the company's records and made available if required.


A company adopts a Constitution either:

  • on registration, if each person specified in the registration application as a person who consents to become a member, agrees in writing to the terms of a constitution before the application is lodged; or
  • after registration, if the company passes a special resolution adopting a constitution.

A company may modify or repeal its constitution, or a provision of its constitution, by passing a special resolution A special resolution requires at least 21 days notice (28 days for public listed companies) and the agreement of a 75% majority of votes cast (refer s9, 136, 137, 140, 249H and 249L).

A proprietary company does not need to lodge a copy of its constitution. If a special resolution is passed affecting the company's name, share capital or type, then the appropriate document for that change should be lodged within the required lodgement period.

The Australian Taxation Office (ATO) has specific clauses which the constitution of a non-profit company must contain to be eligible for tax concessions. (More information can be obtained by visiting their website at

Replaceable rules

A table of replaceable rules can be found in the Corporations Act, s141. The following table indicates the subject of the rule and the relevant section of the Corporations Act that covers each rule. The content of each of those sections in the Corporations Act applies as the replaceable rule. Under s135(1), replaceable rules do not apply to a proprietary company while the same person is both its sole director and sole shareholder.

A company may include in its constitution (by reference or otherwise) a replaceable rule that does not otherwise apply to it. Also, a provision of a section or subsection that applies to a company as a replaceable rule can be displaced or modified by the company’s constitution.

Provisions that apply as replaceable rules

Officers and Employees

1 Voting and completion of transactions-directors of proprietary companies
2 Powers of directors
3 Negotiable instruments
4 Managing director
5 Company may appoint a director
6 Directors may appoint other directors
7 Appointment of managing directors
8 Alternate directors
9 Remuneration of directors
10 Director may resign by giving written notice to company
11 Removal by members-proprietary company
12 Termination of appointment of managing director
13 Terms and conditions of office for secretaries

Inspection of books

14 Company or directors may allow member to inspect books

Director's Meetings

15 Circulating resolutions of companies with more than 1 director
16 Calling directors' meetings
17 Chairing directors' meetings
18 Quorum at directors' meetings
19 Passing of directors' resolutions

Meetings of members

20 Calling of meetings of members by a director
21 Notice to joint members
22 When notice by post or fax is given
23 Notice of adjourned meetings
24 Quorum
25 Chairing meetings of members
26 Business at adjourned meetings
27 Who can appoint a proxy

[replaceable rule for proprietary companies only]

28 Proxy vote valid even if member dies, revokes appointment etc.
29 How many votes a member has
30 Jointly held shares
31 Objections to right to vote
32 How voting is carried out
33 When and how polls must be taken


34 Pre-emption for existing shareholders on issue of shares in proprietary company
35 Other provisions about paying dividends
36 Dividend rights for shares in proprietary companies

Transfer of Shares

37 Transmission of shares on death
38 Transmission of shares on bankruptcy
39 Transmission of shares on mental incapacity
40 Registration of transfers
41 Additional general discretion for directors of proprietary companies to refuse to register transfers

Requirements for proprietary company

A company must comply with s113 of the Corporations Act if it is to:

  • be registered as a proprietary company; or
    • convert to a proprietary company; or
      • remain registered as a proprietary company.

      Section 112 of the Corporations Act states that a proprietary company must be either:

      i. limited by shares; or

      ii. an unlimited company that has a share capital; and

      Section 113 of the Corporations Act states that a proprietary company:

      i. must have no more than 50 non-employee shareholders; and

      ii. must not engage in any activity that would require disclosure to investors under Chapter 6, except for an offer of its shares to existing shareholders of the company or employees of the company or of a subsidiary of the company.

      A no liability company cannot be a proprietary company.

      Note 1: If a proprietary company contravenes s113, one consequence is that ASIC may require it to convert to a public company (s165).

      This is Information Sheet 23 (INFO 23), reissued in July 2010. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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      Last updated: 27/07/2015 02:25