Memorandum & Articles of Association are dangerous

Australian companies created before 1 July 1998 had a 'Memorandum & Articles of Association' (M&A).

Since then all new companies should have a Constitution.

Both guide directors and officers in how the company conducts itself.

Your old M&A still operates but not well. Faults with the old M&A:

  • M&As require an Annual General Meeting (AGM). However, the law no longer requires an AGM for Pty Ltd companies. No one has AGMs anymore, but if you don’t then your company is non-compliant for both taxation and insolvency laws. Update to a Constitution so you don’t have to have AGMs.
  • M&As state a ‘list of objects’. This is the purpose of the company. Eg. Sell fishing tackle and retail. If your company now does something else, like acts as a trustee of a doctor surgery then you break the law. Your company is ‘ultra vires’. It is acting outside its powers. Again your company is non-compliant. Legal Consolidated’s Constitution allows you can do anything a human can do – and more.
  • M&As require two directors. The laws changed. You now only need one director. It is safer to only have one director in case the company goes insolvent.
  • M&As set out exact, but now out of date and often illegal, procedures including how to:
    • Exercise corporate powers
    • Issue and allot shares
    • Not avoid liability (as very strange requirement)
    • Transfer shares
    • Vote and proxies
    • Appoint Directors and company secretary
    • Conduct general and director meetings
    • Sign bank documents, loans and mortgages (this is kind of useful because banks often cannot enforce a loan made by a company that is still working under the old M&A)

Be safe. Update to a Legal Consolidated Barristers & Solicitors’ Constitution

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