What is a company’s constitution?

The company’s constitution is a document that binds the company and its members. The constitution refers to the Memorandum and Articles of Association that govern the internal management and affairs of a company, such as the appointment of directors, the conduct of meetings, and the transfer of shares. A company may include any matter as it wishes to, so long as it does not contravene the provisions of the Companies Act 2016. 

Effects of a company’s constitution.

What are the effects of a company’s constitution?

Section 33 of the Companies Act 2016 provides the effect of the company’s constitution, where it binds the company and its members as if the constitution had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the constitution. 

How can companies amend the constitution?

A company can alter or amend its constitution according to sections 36 and 37 of the Companies Act 2016. Section 36(1) provides that the company’s constitution may be altered or amended by a special resolution. Meanwhile, Section 37(1) provides that the Court can make orders to alter and amend the company’s constitution if the Court is satisfied that it is not practicable to obtain the passing of a special resolution to alter or amend the constitution.

Company’s constitution mandatory or not?

The Companies Act 1965 requires every company to have a constitution. However, the Companies Act 2016 provides that the company’s constitution is no longer mandatory for every company except for a company limited by guarantee. Section 38 of the Companies Act 2016 states that a company limited by guarantee shall have a constitution.

The differences between a company’s constitution and shareholders’ agreement.

Are shareholders’ agreement and company’s constitution similar?

The answer is no. The company’s constitution is a document that binds the company, its members and directors. While the shareholders’ agreement is a legally binding agreement between the company and the company’s shareholders. 

Among other differences is that the company’s constitution can be accessed by anyone, in contrast to the shareholders’ agreement which is confidential and the details in the shareholders’ agreement cannot be disclosed to the public.

Jong v Mio [2019] MLJU 2168

In the case of Jong v Mio [2019] MLJU 2168, the constitution of the Defendant company required a quorum of 2 class A shareholders and 1 class B shareholder for a meeting of shareholders and directors of the company. However, the United company which is a class A shareholder has sold its shares to other shareholders and the United company is no longer a shareholder of the Defendant company. Therefore, there is only 1 class A shareholder in the company left. The Plaintiff applied to alter and amend the company’s constitution pursuant to section 37 of the Companies Act 2016 because the said constitution was not fully complied with resulting in the failure of a quorum for the next meeting.

The Court was satisfied that the Plaintiff’s application was made without prejudicing any party and that it was impractical for the company to amend the company’s constitution through the usual procedures set out in the constitution itself. 

The Court ordered that the Defendant’s company constitution to be altered and amended and a copy of the company’s constitution that has been altered and amended should be lodged by the Defendant to SSM within 30 days from the date of the Court’s order.

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