What is a company constitution?
A company’s constitution is a document that sets out the rules and regulations governing how the company is run. It usually includes information such as the company’s name, registered office address, objects of the company, number of directors and their names, and shareholders’ details.
The shareholders may pass a special resolution to amend the constitution. Usually, amendments to the constitution are only made to facilitate changes to the company’s operations (e.g. an addition or removal of a director) or to reflect changes in the law.
Why is it necessary for companies to have a constitution?
A company constitution is necessary for a number of reasons. Perhaps most importantly, it provides a framework for how the company should be run and sets out the roles and responsibilities of those involved in running it. This is especially important in Malaysia, where there is a need for greater corporate governance and transparency. Having a constitution in place can help to ensure that all stakeholders (including shareholders, directors, officers, employees, and others) are clear about their rights and obligations.
Aside from providing direction and clarity, a company constitution can also help to safeguard the interests of minority shareholders. For example, it can spell out what occurrences would trigger a change in control of the company or give businesses protections against hostile takeover attempts.
What are the benefits of the company constitution?
A company constitution is a document that sets out a company’s objectives, powers, and rules. It plays an important role in protecting the interests of shareholders and directors and shaping the company’s culture and identity. There are many benefits to having a company constitution, including:
- enshrining the company’s core values and purpose;
- facilitating clear decision-making by setting out roles and responsibilities;
- providing flexibility to respond to changing circumstances;
- enhancing shareholders’ rights; and
- serving as a reference point for resolving disputes.
Having a Constitution can help ensure that a company runs smoothly and efficiently while also safeguarding its members’ interests. It is particularly important for companies with complex structures or multiple shareholders.
Is the company constitution, memorandum, and articles (M&A) of association the same?
Yes, the company’s constitution and the memorandum and articles (M&A) are the same in Malaysia. It was known as M&A before the new Company Act 2016, while it is now known as a company’s constitution after the new act. It is a document that sets out the basic rules and regulations governing how a company will be run.
What are the key provisions of a company constitution?
The key provisions of a company constitution include:
- the company’s name, registered office address, and objects;
- the rules governing shareholders’ rights and obligations;
- the rules governing directors’ duties and powers;
- the procedures for holding shareholder and director meetings; and
- the procedures for amending the constitution.
What are the consequences of breaching a company's constitution?
Breaching a company’s constitution can have serious consequences, including:
- voiding transactions that are contrary to the constitution;
- exposing directors to personal liability;
- prejudicing the interests of shareholders; and
- adversely affecting the company’s reputation.
How can I get a copy of my company's constitution?
If you are a shareholder or director of a company, you should be able to obtain a copy of the company’s constitution from the company secretary. If you are not a shareholder or director, you can request a copy of the constitution from the company.