If a public company decides to have a separate

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If a public company decides to have a separate constitution it must lodge it with ASIC o There are no obligations for Pty Companies to do so {s 136(5) Corporations Act} o But it must be able to send a copy to a member at their request { s 139 Corporations Act} If a company has no constitution then they will be subject to replaceable rules C.3 Contractual Effect of the Constitution and Replaceable Rules Under {s 140 Corporations Act} the constitution and replaceable rules have the effect of a contract between three categories of people o The company and each member o The company and each director and company secretary o A member and each other member The contracts created under s 140 are different to normal contracts because: o There are limits on their enforceability o The terms of the contract can be changed without the consent of every party C.4 Enforcement of the Statutory Contract (1) Outsiders People who are not party to the statutory contract created by s 140 cannot enforce its provisions Prohibition on enforcing outsider rights also applies to restrict members and directors from enforcing provisions that affect them in those capacities (2) Remedies In most cases, a party seeking to enforce the statutory contract will be asking the court either for a declaration or an injunction and it is clearly that these remedies are available C.5 Altering the Constitution The position is that under {s 135 Corporations Act} the replaceable rules can be displaced or modified by the Constitution of the Company Under {s 136 Corporations Act} the constitution can be altered In each case the alteration requires a special resolution – 75% of the votes cast by members entitled to vote on the resolution Additionally {s 249L(c) Corporations Act} requires that the notice proposing the resolution state the text of the resolution and set out an intention to propose it as a special resolution o This potentially leaves a shareholder with a stake of 25% of less vulnerable to changes in constitution (1) Legislative Restrictions on Alteration The change cannot be oppressive {Part 2F.1 Corporations Act} Under {s 140(2) Corporations Act } unless a member agrees in writing they cannot be required by a modification to the constitution after they become a member to: o Take up more shares o Increase their liability o Agree to increased restrictions on share transfer (unless the change is in connection with a changeover from public to Pty) (2) General Law Restrictions on Alteration A company’s power to alter its constitution is subject to the equitable limitation that the majority must not use its voting power for an improper purpose - SEE SHAREHOLDER REMEDIES – EQUITABLE LIMITATIONS ON MAJORITY S/H 7
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