Tutorial 3: Company constitution*
1. John, Robert and Jackie are the only shareholders of Camelot Pty Ltd. John and Robert (who between them hold 80% of the issued shares in Camelot Pty Ltd) want to ensure the shares of Camelot Pty Ltd are not sold to Nixon Pty Ltd, a competitor of Camelot Pty Ltd. John and Robert can call a meeting of shareholders and pass a special resolution altering the constitution to provide that shareholders in Camelot Pty Ltd can transfer their shares to any person except Nixon Pty Ltd without the consent of the company and that amendment is enforceable.
2. Article 11 of the constitution of GI Joe Pty Ltd provides:
“This constitution can only be amended by the company passing a special resolution and with the unanimous consent of Class A shareholders.”
Notwithstanding Article 11, the constitution of GI Joe Pty Ltd can be amended by the company passing a special resolution in accordance with section 136(2) of the Corporations Act (Cth) 2001.
3. While the constitution of a company is technically a contract between, inter alia, the company and its directors, it is a unique contract created by statute pursuant to which no consideration is given and therefore it is not enforceable by the directors.
4. Malcolm is an employee of Unicorn Pty Ltd (“Unicorn”). Malcolm has an employment contract which provides he can only be terminated if he violates Unicorn’s Code of Conduct. In addition, Unicorn’s constitution provides that employees can only be terminated if they violate Unicorn’s Code of Conduct. While Malcolm has not breached Unicorn’s Code of Conduct, Unicorn is trying to terminate him. Malcolm cannot enforce his employment contract because the constitution of a company is NOT a contract between the company and its employees pursuant to section 140 of the Corporations Act (Cth) 2001.
5. Nightclub Pty Ltd is a company which owns a number of night clubs on the Gold Coast. It has a constitution which provides, inter alia:
“No person shall be excluded from attending events at venues owned by Nightclub Pty Ltd unless the directors pass a resolution excluding any such person.”
Jack was drunk and causing mischief at one of Nightclub Pty Ltd’s venues when a manager (who was not a director) said to Jack that he was excluded from the venue and could not return. Jack can enforce the constitution and argue that the exclusion is not enforceable as it was not supported by a directors’ resolution.
6. Pirate Pty Ltd has a constitution which includes the following article:
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