Replaceable rules or company Constitution?

ASIC defines a company constitution as a document or set of documents that:

• Regulates the management and operation of the company; and
• Defines the rights, powers, duties and liabilities of the company's members, officers and directors

Replaceable rules however are provisions in ASIC's Corporations Regulations that a company can choose to adopt as its own rules. ASIC's replaceable rules are contained in Chapter 2J of the Corporations Regulations.There are several key differences between a company constitution and ASIC's replaceable rules:

• A company constitution can be much more detailed than ASIC's replaceable rules, and can specifically tailor the regulation of the company to the company's needs. ASIC's replaceable rules are more general in nature.
• ASIC's replaceable rules can be changed by ASIC without the need for approval from the company's members, whereas a change to a company constitution generally requires the approval of 75% of the members.
• ASIC's replaceable rules can be adopted by a company as its own rules without the need to file them with ASIC, whereas a company constitution must be lodged with ASIC (in certain circumstances).

So, when deciding whether to adopt ASIC's replaceable rules or to have a company constitution in place, companies should consider their needs and what would work best for them. ASIC's replaceable rules may be suitable for smaller companies that do not need a detailed regulation of their affairs, whereas a company constitution may be more appropriate for larger companies or companies with more complex operations. However, it is recommended that all companies have company constitutions to ensure they can meet commercial needs. ie. Opening a bank account or entering into contracts. It is more commercially viable for a company to adopt a constitution from the onset. 

If your company does not have a constitution, you can always adopt one later.

Other questions in Company Registration