Company Constitution Australia | s.136 Corporations Act

A constitution is the written set of rules governing a company's internal management. Section 134 of the Corporations Act 2001 (Cth) gives every company three options: rely on the replaceable rules in the Act, adopt a constitution, or run a combination of both. Choose a constitution and you displace or modify any replaceable rule that would otherwise apply, under s 135(2). That is the whole point of the exercise. The replaceable rules are a serviceable default for a single-shareholder startup with no outside capital, but they say nothing useful about share transfer restrictions, drag-along and tag-along mechanics, dividend classes, or what happens when a founder dies.

The incorporation pack is broader than the constitution alone. It bundles the documents s 117(2) assumes you hold before lodging the application for registration: written consent from each proposed member under s 117(2)(c), written consent from each proposed director under s 117(2)(d), consent from any proposed secretary under s 117(2)(e), and the written agreement on shareholding details required by s 117(2)(k) for a company limited by shares. Add the register of members mandated by s 169 and you have the minute book a court or an ASIC officer would expect to see.

People routinely confuse a constitution with a shareholders' agreement. They are different instruments. The constitution binds the company, each member, each director and the secretary as a statutory contract under s 140; it is a public-facing governance document. A shareholders' agreement for Australian companies is a private contract between the shareholders themselves, dealing with commercial matters the constitution has no business regulating. Most well-run Pty Ltd companies have both.

The governing statute is the Corporations Act 2001 (Cth), administered by the Australian Securities and Investments Commission. Part 2B.4 of the Act, sections 134 to 141, sets out the entire architecture. Section 141 lists the provisions that operate as replaceable rules in table form, running to 39 entries covering director appointment and remuneration, meetings of members and directors, share issues and transfers, and the appointment of a company secretary. Familiar examples include s 201G (company may appoint a director), s 254D (pre-emption on share issues in proprietary companies) and s 248A (circulating resolutions where there is more than one director).

Adoption timing matters. Under s 136(1)(a), a company adopts a constitution on registration if each person who consents to become a member agrees in writing to its terms before the application is lodged. After registration, adoption requires a special resolution under s 136(1)(b), meaning at least 75 per cent of votes cast by members entitled to vote. The same 75 per cent threshold applies to later modification or repeal under s 136(2). A constitution adopted pre-registration must be agreed in writing before you lodge, not afterwards. A pack assembled in the days following registration is not fatal, but it forces you down the special resolution route for something you could have had for free.

Lodgement obligations split by company type. A public company must lodge its constitution with ASIC under s 136(5), and where it has one on registration, a copy goes in with the s 117(3) application. A proprietary company lodges nothing unless ASIC directs it to under s 138. That exemption misleads founders into thinking the document is optional paperwork. It is not: s 139 requires the company to send a member a copy within seven days of a written request, and s 140(1) makes it enforceable as a contract.

Two traps deserve naming. First, s 135(1) switches the replaceable rules off entirely for a proprietary company while the same person is both sole director and sole shareholder, which is exactly why so many one-person companies need a constitution rather than merely wanting one. Second, the consent obligations in ss 201D and 204C are strict liability offences, and appointments made without prior written consent may be void. ASIC publishes its own plain-language guidance on company rules and constitutions on the ASIC website, which is worth reading alongside any template.

The obvious trigger is incorporating a new Pty Ltd company. You reach the BRS declaration screen, tick the box confirming you hold the necessary written consents and agreements, and at that moment you either have them or you have made a false declaration. Most first-time founders tick and move on. The consents sit unwritten until an accountant asks for the minute book two years later.

The second trigger is taking on outside capital. An angel investor or a seed fund will not proceed on replaceable rules. They want pre-emptive rights that actually work, share classes with defined dividend and voting entitlements, and a transfer regime that stops a founder selling to a competitor on a Friday afternoon. The replaceable rules give you s 254D pre-emption and nothing else worth the name. The third scenario is adding a second shareholder to a sole trader company, which flips the s 135(1) exclusion back on and exposes governance gaps that never mattered while one person held everything.

Family and structuring work generates the fourth. Corporate trustees for a self-managed super fund need a constitution consistent with the trust deed, and special purpose company status under Regulation 2B.3.01 of the Corporations Regulations 2001 carries its own drafting requirements. Two edge cases sit at the margins. A company facing a s 233 oppression claim may find the court orders it to adopt a constitution as a remedy, which is a poor way to acquire one. And where a company wants to entrench a provision beyond the reach of an ordinary special resolution, s 136(3) permits it, but the entrenching mechanism must be drafted into the constitution itself and cannot be bolted on later. Founders who plan to grant options or issue employment contracts with equity components should settle the share class architecture before the first grant, not after.

• The displacement of the replaceable rules opens the constitution with an express statement that the rules in s 141 do not apply except where specifically incorporated. Drafters who omit this clause create ambiguity about whether a given rule survives, and s 135(2) rewards precision here. The clause names the excluded sections rather than gesturing at them collectively.
• The share capital and class rights provisions define each class, its voting entitlement, its dividend rights and its position on a winding up. Variation of class rights requires a special resolution of both the company and the affected class under s 246B, and the clause reflects that rather than attempting to override it.
• The transfer restrictions and pre-emption clause replaces the bare s 254D default with a full offer round, a valuation mechanism, and a fallback where the board may refuse to register a transfer. This is the single clause that most distinguishes a drafted constitution from the statutory default.
• The director appointment, powers and removal provisions cover appointment by the members and by the board, alternate directors under s 201K, and the quorum and casting vote arrangements that decide deadlocks in a two-director company. Silence on the casting vote is a common and expensive omission.
• The directors' meetings and circulating resolutions clause modifies s 248A so that written resolutions can be signed in counterparts and by electronic means, which matters when directors sit in different states.
• The indemnity and insurance provisions grant directors and officers the widest indemnity permitted, stopping short of the prohibitions in s 199A and s 199C, which void any purported indemnity against liability owed to the company itself.
• The dividends and distributions clause aligns with the solvency test in s 254T and allows differential dividends across share classes.

The Corporations Act 2001 (Cth) is Commonwealth legislation and applies uniformly across every state and territory, so a constitution valid in Perth is valid in Hobart. What varies is the surrounding regulatory and revenue landscape that a newly registered company walks into.

New South Wales hosts the largest concentration of company registrations and the Sydney registry of the Federal Court, which hears most oppression and winding up applications under ss 233 and 461. Companies holding land in NSW should be aware that share transfers in a landholder company can attract landholder duty under the Duties Act 1997 (NSW) once the land holdings exceed the statutory threshold, so the transfer clause interacts with a revenue liability that has nothing to do with the Corporations Act. Payroll tax registration with Revenue NSW follows separately once wages cross the annual threshold.

Victoria applies its own landholder duty regime under the Duties Act 2000 (Vic), with a lower entry threshold than several other jurisdictions, and Victorian practitioners tend to draft the pre-emption clause with duty in mind rather than as a pure governance mechanism. The Melbourne registry handles a high volume of corporate insolvency work, and a constitution with a clean deadlock provision is worth more in Victoria than the drafting time it costs.

Queensland registrations frequently involve corporate trustees for family trusts and SMSFs, where the constitution must sit consistently alongside the trust deed. A constitution permitting the company to trade in its own right while the deed restricts it to trustee activities creates a conflict that surfaces only when a bank asks for both documents. Queensland's Duties Act 2001 (Qld) adds its own transfer duty layer.

Western Australia and the resources sector produce a distinct pattern: joint venture companies, farm-in arrangements, and constitutions that must accommodate shareholders who are themselves corporate groups. Perth practitioners often entrench the class rights variation procedure under s 136(3) because the commercial bargain depends on it. Companies registered in WA should also budget for the Duties Act 2008 (WA) landholder rules where mining tenements are involved. Founders across all jurisdictions should pair the pack with personal legal documents such as wills and powers of attorney, since a sole director's death without a succession mechanism strands the company entirely.

You start by selecting your company type and telling the form whether the company will be limited by shares, which almost every Pty Ltd is, and whether it will be a special purpose company. From there the template adjusts the class rights architecture and the number of share classes it generates. You enter the proposed company name, the registered office address, and the principal place of business, and if the registered office sits at an accountant's or a virtual office provider's premises, the form prompts you to generate the occupier's written consent alongside everything else. Directors come next: full name, date and place of birth, residential address, and the director identification number each director must already hold. The form builds the s 201D consent for each one and the s 204C consent for any secretary.

Share allocation follows. You specify each member, the class and number of shares taken up, the amount paid and unpaid, and whether the shares are beneficially held. The template writes the s 117(2)(k) written agreement and populates the register of members required by s 169 from the same data, so the two never diverge. The last screen asks whether the constitution is being adopted before registration or afterwards, and it drafts either the pre-registration written agreement under s 136(1)(a) or the special resolution under s 136(1)(b). You download the whole pack in Word and PDF, sign, and keep it with the company's records. Nothing goes to ASIC unless the company is public.

The most frequent error is treating the constitution as something you can obtain after registration. It can be done, through a special resolution under s 136(2), but you have converted a free pre-registration step into a formal shareholder process, and if a shareholder has already fallen out with you, the 75 per cent threshold suddenly matters. The second mistake is copying a constitution from a company with a different share structure and leaving the class rights clauses intact. A single-class constitution grafted onto a two-class cap table produces provisions that reference classes the company does not have, and a court reading s 140 will not simply ignore them. Third, and this one recurs in ASIC's own compliance work: lodging the Form 201 declaration confirming written consents are held when they are not. That is a strict liability offence under the consent provisions, and ASIC has grown noticeably more willing to ask for the paperwork when a company later lodges a Form 492 correction request.

Two more. Founders forget that s 135(1) removes the replaceable rules from a sole director and sole shareholder company entirely, so a one-person company with no constitution operates on the ordinary provisions of the Act and ss 198E, 201F and 202C alone, which is thinner than most people assume. And the register of members under s 169 gets treated as an afterthought, updated by memory rather than by resolution, until a due diligence request in a sale process reveals it never matched the ASIC record. Reconcile the register and the ASIC extract every time shares move. A business documents catalogue for Australian companies will not fix a register that has drifted for five years.