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Drafting the Constitution of a Company

Constitution of a company

A company, other than company limited by guarantee, may or may not have a constitution.

If a company has a constitution, the company, each director and each member of the company shall have the rights, powers, duties and obligations set out in the Companies Act 2016, except to the extent that such rights, powers, duties and obligations are permitted to be modified in accordance with the Act, and are so modified by the constitution of the company.

If a company has no constitution, the company, each director and each member of the company shall have the rights, powers, duties and obligations as set out in the Act.

Adopting a constitution

A company may adopt a constitution for the company and the adoption shall be by way of special resolution.

The constitution of a company has no effect to the extent that it contravenes or is inconsistent with the provisions of the Companies Act 2016.

Subject to the provisions of the Act, the constitution adopted shall be binding on the company, its directors and its members.

The company shall lodge the constitution with the Registrar within thirty days from the adoption of a constitution.

Effect of constitution

The constitution shall, when adopted, bind the company and the members to the same extent 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.

All moneys payable by any member to the company under the constitution shall be a debt due from such member to the company.

Contents of a company’s constitution

Subject to the provisions of the Companies Act 2016, the constitution of a company may contain provisions relating to -

(a) the objects of the company;

(b) the capacity, rights, powers or privileges of the company if the provision restricts such capacity, rights, powers or privileges;

(c) matters contemplated by the Act to be included in the constitution; and

(d) any other matters as the company wishes to include in its constitution.

If the constitution sets out the objects of a company -

(a) the company shall be restricted from carrying on any business or activity that is not within those objects; and

(b) the company shall have full capacity and powers to achieve such objects, unless the constitution provides otherwise.

Company may alter or amend constitution

A company having a constitution may, by a special resolution, alter or amend its constitution unless the constitution itself prohibits the alteration or amendment.

Upon the date of the special resolution was passed or a later date as specified in the resolution, any alteration or amendment to the constitution shall bind the company and the members accordingly.

The company shall notify the Registrar of the alteration or amendment of its constitution and lodge a copy of the constitution as altered or amended within thirty days from the date the special resolution was passed.

Since the constitution is the main document that stipulates a company's processes and procedures, a company's failure to incorporate any clauses into its constitution may lead to ambiguity and difficulties. Drafting a constitution that meets the bill and the main goals of the business will enable the right people to make decisions and resolve issues such as succession planning, signatories, and technology use.

When drafting the constitution, consider the following factors:-

1. What should your company's decision-making structure look like?

2. How will you stipulate the rights and obligations of your company's personnel?

3. What are the unique rules and regulations of your company?

4. Do you comply with the Companies Act 2016?

A well-drafted constitution is the cornerstone of your company's growth and development. Contact us today.

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