When putting together the Constitution of a company there are certain key areas/matters to be taken into consideration/reviewed.
The Constitution is a document which formalises the division of power between shareholders, directors and officers of a company and provides the operational framework/rules for the control, governance and management of the company.
So, the areas to be considered should include:
Shares
- Classes of shares – some of which may have restrictive rights (eg, to receive dividends only, but not vote)
- Power of directors (most usually) – or shareholders – to create new classes/issue more shares
- Pre-emptive rights – particularly relevant with a small number of shareholders; unworkable in a large public company
- Share certificates vs holding statements – the ‘modern’ way
- Control over share transfers – but impossible with a stock exchange listed company
- Should there be proportional takeover restrictions (need to refresh every 3 years)
Shareholders
- Direct voting – the ‘new’ way in lieu of proxies well(……in addition to)
- Meetings – does the chairman get a casting vote
- Is 2 sufficient for a meeting quorum
- Notice period – 21 or 28 clear days minimum
Directors
- Shareholder ratification after board appointment
- 3 year rotation (mandatory for stock exchange listed companies)
- Quorum for meetings: 2 or ‘more than half’ the number of directors
- Does chairman get a casting vote
- Circulating resolutions – to be signed by all directors or only a majority
- Minimum period [before a shareholder meeting] of say 6~8 weeks for an ‘outsider’ to give notice to stand as a director
- Alternate director rules
Administration
- Dividends – declared by directors (most common) or shareholders – and not to be restricted to payment out of profits – needs wider ‘positive net equity’ provision
- Bank accounts – to be operated on by directors, with minimum 2 to sign, or whoever they empower
*Originally written by Company Secretary, an Australian virtual company secretary service.