What Is A Company Constitution?

The constitution of a company is the document setting out the rules for the internal management of the company.

It is essentially a contract between the shareholders, directors, and the company, prescribing the rights, roles, and responsibilities between these parties. Think of it as the rule book setting the foundations of the company.

Typically, a company would adopt a constitution when first incorporating, but some companies simply choose to rely on the model articles of association prescribed under the Companies Act 2006.

Some topics usually covered in a company constitution are:

1. How to issue shares
2. Rights of different share classes
3. How unpaid shares work
4. Liability of shareholders
5. How transfer of shares work
6. What happens to shares if a shareholder dies, is incapacitated or becomes bankrupt
7. How to hold meetings and pass resolutions
8. How voting works
9. How shareholder proxies work
10. How to appoint and remove directors
11. Remuneration of directors
12. Powers of directors
13. Role of the secretary
14. Role of the managing director
15. How to execute documents
16. Dividend rights
17. Winding up the company
18. Loans to shareholders
19. Indemnity and insurance