Constitution Updates
Memorandum and Articles of Association are now out of date.
Adopting a new constitution is the best way to convert a company, registered prior to July 1998, to a Single Director Company.
Changes have resulted from both the Company Law Review Act 1998 and the Corporations Act 2001 which allow three options regarding the rules governing Australian companies:
- Maintain the outdated Memo & Articles as the ongoing Constitution
- Abolish the outdated Memo & Articles and rely on the Replaceable Rules contained in the Corporations Act; or
- Replace the outdated Memo & Articles with a modern Constitution
The first option has the disadvantage of retaining references to share premiums, authorised capital, and Table A - none of which are now applicable. They may also require the use of a common seal, governance by two directors and the presence of a corporate secretary, all of which are now unnecessary.
The second option assumes that a fully amended copy of the Corporations Act will be available to the directors and that the generic structure and powers suggested by it will be suitable for all companies.
As a result we suggest and offer a constitution update service which provides a modern replacement. These Australian constitution updates are drawn to recognise recent statutory and practical changes, whilst ensuring that they are tailored to each company's requirements.
Click on the PDF icon below to download detailed instructions on carrying out a constitution update or conversion.
You Can Download the latest version of Acrobat Reader from the link below.
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For the Professional Advisor
The Advantages of Adopting the Constitution Updates
- Our constitution updates have a clause that complies with the ATO's draft ruling regarding Div 7A (Income Tax Assessment Act) agreements, which allow for loans between the company and shareholders.
- Only a single director is required by the law, however two will be required if existing M&As are not updated.
- The minimum notice for meetings has been extended by the changes in law from 14 days to 21 days.
- Under the new constitutions, meetings held in two or more places using any technology that gives all members reasonable opportunity to participate (eg telephone conferencing) are allowable. Under old M&As all members had to be physically present.
- Further the use of circulating resolutions can entirely avoid the necessity for director's meetings.
- The use of a common seal to execute documents is no longer required, although it would still be required if the company's articles still state it.
- The rules regarding proxies have been relaxed.
- If existing companies abandon their common seal, significant amendments to their old Articles regarding the execution of documents, share certificates, appointment of corporate representatives, attorneys or proxies would be required. Our new constitutions have been drafted to eliminate the necessity for a common seal when executing documents.
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