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A company constitution is a document that contains a set of rules on how a company will be governed. Although it is not a legal requirement that a private, unlisted company must have this document, it is very common for companies to adopt company constitutions. Likewise, there are substantial benefits to doing so. This article explains what a company constitution is, the benefits of having one, and the process and approvals required to adopt, amend or revoke the document.

Do You Need a Company Constitution?

Your decision to adopt a constitution may depend on your company’s structure. A private, unlisted company in New Zealand does not require this document. Hence, it is possible to incorporate your company without having such a document in place. Consequently, you can choose to adopt one later on. 

Further, if your company does not have a constitution, then the Companies Act 1993 (NZ) rules apply by default.

What Is Contained in a Company Constitution?

This legal document sets out essential matters relating to the governance of the company. This can include:

  • the appointment and removal of directors;
  • how directors and shareholders make decisions and hold meetings;
  • how the company can issue shares;
  • the process for a shareholder to transfer their shares; and
  • the ability of the company to indemnify and ensure directors against liability. 

Why Should You Have a Company Constitution?

Although a company does not need a constitution, it can be beneficial to have one. Company constitutions are beneficial because they contain (and organise) the rules that govern the company in a single document. This document is easier to navigate than the alternative of having to identify the relevant provisions in the Companies Act.

Furthermore, this document is crucial because its terms are specifically prepared for your company. As such, it can contain provisions which your company needs and which the Companies Act does not contain, such as rights relating to a particular class of share you have agreed to issue to an investor. 

How to Adopt a Company Constitution

A company which does not have a constitution may adopt one by a special resolution of shareholders. A company may also, by a special resolution of shareholders, amend or revoke its existing constitution. To pass a special resolution, at least 75% of entitled shareholders must vote to pass the resolution.

Notifying the Companies Office

You must notify the Companies Office of New Zealand within ten business days of the passing of the resolution to adopt, amend or revoke your company constitution. 

You can notify the Companies Office of this online. To do so, you must:

  • provide the date on which the resolution to adopt, amend or revoke the document passes;
  • upload a copy of your new or amended document; or
  • remove your revoked document.

Key Takeaways

Company constitutions are one of the most important corporate governance documents for your company. It covers key matters relating to the decision making by directors and shareholders in the company. Also, it outlines the process for dealing with company shares. Although it is not compulsory for a private, unlisted company to have such a document, it can be beneficial to have one. Additionally, this document helps to contain your company’s set of rules in a single place, and you can ensure that its terms have been prepared based on your company’s needs and requirements. 

If you require assistance with preparing a company constitution or any other corporate governance documents, contact LegalVision’s New Zealand business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is a company constitution?

A company constitution is a document outlining the internal management of your company. Specifically, it governs the rules of the relationship between company directors and the company shareholders.

Do I need a company constitution?

You are not required to have a constitution if you are a private, unlisted company in New Zealand. Where you do not have a constitution, the Companies Act 1993 (NZ) rules apply by default.

How do I adopt a constitution?

You can adopt a constitution if your company is registered and you pass a special resolution at a meeting, which requires at least 75% of the votes of shareholders entitled to vote on that matter.

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