Internal Governance.pptxVIP

Topic 6: Internal Governance Topic 6 - Outline Overview of internal governance Company constitution Replaceable rules Amending the constitution Contractual relations – s 140 Learning Outcomes Explain what is meant by ‘internal governance’. Provide an outline of the source and content of a company’s internal management rules. Explain the role of the corporate constitution. Explain the function of replaceable rules. Explain and analyse the contractual nature of the constitution and replaceable rules. Explain the significance and application of section 140 of the Corporations Act. Explain how a company constitution may be amended and be able to draft an appropriate resolution. Internal Governance A company is a separate legal entity. It is treated as a legal person, as though it is a natural person. However, a company must act through a natural person (e.g. a director). A company’s internal governance is regulated by s 134 of the Corporations Act. Internal Governance Prior to the Company Law Review Act 1998, a company’s constitution was the Memorandum of Association and Articles of Association (Table A or B). The Memorandum defined the nature of the company. The Articles had rules to govern the powers of the Board of Directors, members and the conduct of meetings. Internal Governance After July 1998 a company was no longer required to have its own constitution. Certain companies, however, must have a constitution: No liability companies Public companies listed on the ASX Internal Governance The internal management of a company is now regulated by s 134. A company’s internal management may be governed by: Replaceable Rules; A constitution; or A combination of both (s 134, Corporations Act 2011) Company Constitution A company may adopt a constitution on registration, or after registration by passing a Special Resolution: s 136. A company constitution sets out how the company will be managed. It enables the various stakeholders “to personalise the companys structur