The Constitution of a Company

Last updated on January 4, 2019

The constitution of a company, comprising one or more documents, sets out the basic framework by which a company is organised. For companies incorporated before 3 January 2016, its constitutional documents typically consisted of two documents – its Memorandum of Association and its Articles of Association. The former document defines the company’s essential features whilst the latter document regulates the relationship of the company with its members, and also the same amongst members.

The above-mentioned bifurcation has been removed with the enactment of the Companies (Amendment) Act 2014, which now mandates all companies incorporated on or after 3 January 2016 to adopt a single-document constitution.

Is There a Need for Companies to Replace the Memorandum and Articles of Association with a Single-document Constitution?

The Companies Act does not require companies incorporated before 3 January 2016 to replace their dual-document constitution with a single-document constitution. To this end, section 4 of the Companies Act defines a company’s constitution as comprising the existing Memorandum of Association, Articles of Association, or both, for companies incorporated before 3 January 2016. Thus, a company’s registered Memorandum and Articles of Association remain effective and any rules pertaining to a company’s constitution will apply equally to these documents unless otherwise specified.

For more information on the features of dual-document constitutions, please refer to our article on Company Memorandum and Articles of Association.

A Constitution is Required for Registration and Incorporation

According to Section 19 of the Companies Act, anyone who desires to register and incorporate a company must submit the constitution of his company to the Registrar. This means that the company’s constitution must be lodged with the Registry of Companies.

Contractual Effect of a Constitution

The constitution of a company has a contractual effect between the company and its members, and between its members. Section 39(1) of the Companies Act gives each member of the company a personal right to bring an action to enforce a regulation of the Constitution, or to restrain its breach as the Constitution effectively creates a contract between the company and all its members, and between these members. However, it should be noted that section 39(1) only relates to those rights which affect the member in his capacity as a member and not those in his personal capacity.

Terms in the Constitution

The constitution of the company must contain the following, as stated by section 22 of the Companies Act:

  1. the company’ s name;
  2. if the company is a company limited by shares, a statement that the liability of its members is limited;
  3. if the company is a company limited by guarantee, a statement that its members are liable to contribute to the assets of the company an amount not exceeding a specified amount when the company is being wound up;
  4. if the company is an unlimited company, a statement that the liability of its members is unlimited;
  5. if the company is an unlimited company or a company limited by guarantee, the number of its members at the time of its application for registration;
  6. the full names, addresses and occupations of the subscribers to the Constitution; and
  7. a statement that such subscribers wish to form a company on the terms of the Constitution and (where the company is to have a share capital) they agree to subscribe for a stated number of shares in the capital of the company.

These conditions are the minimum requirements for a company’s Constitution. Thus, other terms may be included. For example, a company’s constitution is also required contain the regulations of the company. Further, for private companies limited by shares, the constitution is required to restrict the right to transfer its shares, and to limit its members to 50 at most.

Other common terms in a constitution

Apart from the various terms stated above, companies are also required to draft regulations that govern its internal affairs into their constitutions. Generally, companies are free to decide what these regulations are, subject only to the Companies Act and relevant common law principles. Common terms provided for in the constitution include (but are not limited to) the following:

  • Issue, allotment and transfer of shares
  • Organisation and conduct of board and shareholder meetings
  • Appointment and removal of directors
  • Directors’ powers and duties
  • Distribution and capitalisation of profits
  • Distribution of surplus assets in the event of winding up

Sections 36 and 37 of the Companies Act state that the Minister may prescribe Model Constitutions for private companies and companies limited by guarantee. These companies may adopt these Model Constitutions in whole or in part, which may be found in the Companies (Model Constitutions) Regulations 2015.

It should be noted that while a company may choose to draft its own constitution independently, the company will not need to file its constitution if it adopts the Model Constitution without amendments, and can simply refer to the type of Constitution chosen during registration.

You may wish to engage a lawyer to customise your company’s constitution to suit its specific needs.

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