Company constitution articles of association are important business documents. They are also referred to as the Memorandum and Articles of Association and the Articles of Incorporation. Although there are no specific rules for what needs to be included in a business's constitution, anything that is included is legally enforceable.

Understanding the Company Constitution

The date of business incorporation can affect the required documents. Any business that was incorporated before January 3, 2016, must include the following documents:

  • Memorandum of Association: a document that describes the business features
  • Articles of Association: a document that regulates the relationship between the company and the board members

Today, the Companies Act requires that all registering businesses submit their constitution to the local registrar. The constitution will set the operating organizational structure of the business. The company constitution will often include the following information:

  • The name of the company
  • The type of business
  • The main purpose of the business
  • Individual rights and expected tasks of each director
  • Individual liability of each member
  • Total capital of the business
  • The rules of the company
  • The administrative procedures of the company
  • The specific rights and privileges of the members of the company

A business is legally required to follow the specific rules and procedures set out in its constitution. If the constitution's regulations no longer serve the business and its needs, it can be amended. Additionally, the rules set out in the constitution may vary, depending on the role of each person. There may be individual tasks set out for shareholders and directors.

A copy of the constitution must be filed at the registered office. It must include the signature of every member and include the number of shares that each member owns. The members are allowed to access the constitution at its registered office. The company can also send a copy of the constitution to an interested member.

It is important to keep in mind that the constitution must be filed at the time of business registration. After it is filed, it becomes a legally binding contract that connects the company's members with the company itself.

Required Clauses in the Constitution

There are some clauses that a business is required to include in its constitution:

  • Name clause: the constitution must include the legal name of the company. The company must then be referred by this name on all official documents going forward.
  • Registered office clause: this clause includes the location of the registered office.
  • Liability clause: the company must list the individual liabilities of each member. It must also include any information about limited shares, guarantee limits, unlimited liabilities, and unlimited guarantees.
  • Capital clause: this includes information about the amount of capital that the business owns.
  • Subscriber clause: the subscriber clause should include the full name, address, and title of every subscriber within the company. It should also list the specific number of shares that the individual subscriber owns.
  • Objects clause: the objects clause is an optional section. It places restrictions on the rights and privileges of the company.
  • Rules: the rules by which the company will abide by must be included in the constitution.

Constitution Rules Section

The rules section of the constitution is fundamental. It includes rules that set the structure of the business, such as:

  • Shares: how shares will be issued, transferred, and the process of share certificates.
  • Meetings: a detailed description of how general meetings will be conducted and recorded.
  • Directors: the process in which company directors are appointed and dismissed. It will also include rules involving specific director duties.
  • Secretary: the process in which the company secretary is appointed or removed.
  • Common seal: the process of how the company seal will be kept protected and who is authorized to use the official seal.
  • Financial statements: the process of maintaining and recording the company financial statements.
  • Dividends and reserves: the declaration and purpose of dividends and reserves.
  • Capitalization of profits and reserves: the process of approving capitalization.
  • Notices: the process of sending notices and other official documents to company members.
  • Winding up: the process that is required for winding up.
  • Indemnity: the indemnity requirements of every board member, officer, and director within the company.

Drafting the constitution of a business can be complex as it requires specific information to be included.

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