Did you know that an off-the-shelf constitution can be detrimental to your business?
Whether you’re a company, club or association, you will most likely need a governing document known as a constitution. For private companies, the constitution will set out the rights, roles and responsibilities of directors and shareholders as well as the rules that govern the internal management of the company.
The best way to describe a company constitution is to think of it as a contract between the company and any director, secretary, member and each other. Drafting a constitution is a great way to clarify any objectives and processes of the company.
However, a poorly drafted and/or an off-the-shelf constitution can expose the company to a number of risks, leading to confusion and additional costs.
Does your constitution clearly outline how shares will be transferred and how dividends are paid to shareholders?
How many votes are required to make certain decisions at meetings?
Does it factor in changes in technology, for example how technology is used in meetings for attendance and appointing a proxy?
What does your constitution say about how the company will issues loans to third parties?
Practically speaking, an ineffective constitution will mean that your business won’t be able to run the way you want it to.
For more information, speak to one of our committed corporate and commercial lawyers who will be able to draft a bespoke constitution custom-made to suit the circumstances of your business.