The Registered Constitution

Introduction:

In a previous note, we highlighted that a company can have or registered constitution or use the default constitution provided for it under the Companies Act, 2019 (Act 992). In this note, we will discuss the meaning of a registered constitution, when a company can have a registered constitution, the content of the registered constitution, the form of the registered constitution, and what a registered constitution may be used to achieve.

Meaning of a Registered Constitution:

Per the First Schedule of Act 992, the registered constitution is defined as:

the document registered with the Registrar under Section 23 as representing the constitution of a company.

Said Section 23(supra) gives the company an option to have a registered constitution. Once the company decides to have a registered constitution, Section 23 provides that the constitution shall be:

1. Signed by one or more subscribers or the company secretary
2. delivered to the Registrar by the subscriber or an authorised representative before incorporation; or
3. delivered to the Registrar by the Company Secretary, director, or an authorised representative after incorporation.

When a Company Can Have a Registered Constitution:

Per the provisions of Section 26 of Act 992, a company can have a registered constitution:

1. At Incorporation: Per Section 13(5) of Act 992, an application for incorporation may be effected either by delivery of the application form alone, or by “the delivery of the completed application form as required by subsection (2) accompanied with a proposed constitution.”
2. After Incorporation: Section 26(2) and 30(1) of Act 992 recognise that a company, after incorporation, can opt to have a registered constitution. Per Section 30(1) of Act992, “shareholders or members of a company may, by special resolution adopt a registered constitution where a company does not have a registered constitution.” After this special resolution, the constitution is drafted and per Section 26(2)(b) of Act 992 , the company shall:

1. Deliver the Constitution to the Registrar, and
2. Deliver, to the Registrar, a special resolution of the company to indicate the intention to have the registered constitution.

Contents of a Registered Constitution:

Section 26 of Act 992 makes provisions on the content of the registered constitution.

If a company has a registered constitution at incorporation, Section 26(1) provides that the registered constitution shall state the following:

1. The name of the company, ending with “LTD” if the company is a private company limited by shares; with “PLC” if the company is a public company limited by shares, with “LBG” if the company is a company limited by guarantee; with “PRUC” if the company is a private company unlimited by shares; and with “PUC” if the company is a public company unlimited by shares.
2. The names of the first directors of the company
3. That the powers of the directors are limited in accordance with Section 189.

If the company opts to have a constitution, Section 26(2) provides that the new constitution

may state the nature of the business in that constitution which the company is authorised to carry on, or if the company is not formed for the purpose of carrying on a business, the nature of the objects for which the company is incorporated;

In addition to the above separate provisions on the content of the constitution based on whether the constitution was delivered at incorporation or subsequently adopted, the following forms part of the constitution of the company:

1. The number of shares with which the company is registered if the company is one with shares. So, this applies to an unlimited company and a company limited by shares.
2. Any other lawful provision to regulate the structure and administration of the company.

In addition, the constitution must be signed by one or more subscribers (per Section 28), an act known as subscription to the constitution. Thus, the signature of at least one subscriber, defined as a person who applies for the incorporation of a company, must also be contained in the constitution.

Form of the Registered Constitution:

While Section 26(supra) makes provisions on the content of the constitution, Section 27 makes provisions on the form of the constitution. By "form," the Act is referring to the structure of the constitution in terms of the arrangement of provisions, among others.

Generally, the registered constitution of a company must conform to the form of the default constitution of its type. Thus, if a company, say an unlimited company, wants to have a registered constitution, the arrangements of sections and provisions must be in a form that is similar to the form of the default constitution of an unlimited company provided under Act 992. For the purposes of clarity, if the default constitution of a private company limited by shares is arranged as follows:

1. Provisions on capacity of the company
2. Limitation of the powers of the board of directors
3. Limitation of liability of the members of the company,

Then a private company limited by shares wishing to have a registered constitution must have its constitution complying with this same form and must similarly be arranged as follows:

1. Provisions on capacity of the company
2. Limitation of the powers of the board of directors
3. Limitation of liability of the members of the company,

Subject to Act 992, the registered constitution may then make a separate provision on the capacity of the company, the limitation on the powers of the board of directors, and the limitation of the liability of the members of the company. By the phrase “subject to Act 992,” it means that some provisions in the default constitution can be changed and effect will be given to the change made. However, some provisions cannot be changed. For example, on the removal of directors of a company, Section 176 of Act 992 provides that “a company may by ordinary resolution at a general meeting remove from office all or any of the directors despite anything in the constitution of that company …”

Under Act 992, the following default constitutions are provided for its form to be adopted in drafting a registered constitution:

1. For a private company limited by shares, its registered constitution must be in the form of the constitution provided in Second Schedule.
2. For a public company limited by shares, its registered constitution must be in the form of the constitution provided in Third Schedule.
3. For an unlimited company, its registered constitution must be in the form of the constitution provided in Second Schedule if it is private and in the Third Schedule if it is public.
4. For a company limited by guarantee, its registered constitution must be in the form of the constitution provided in Fourth Schedule.

Finally, and as part of the form the registered constitution must take, Section 27(4) of Act 992 provides that “The registered constitution shall be printed, typewritten, handwritten, or be in any other legible form acceptable to the Registrar.”

What a Registered Constitution Can Do:

Among others, the registered constitution of a company may make provisions on the following:

1. Determine the powers and capacity of the company:

Per Section 18(3) of Act 992,

The registered constitution of a company may contain a provision regarding the capacity, rights, powers or privileges of the company if the provision restricts the capacity of the company or those rights, powers and privileges.

2. Determine the nature of the company’s business:

Per Section 19(1) of Act 992,

Where the registered constitution of a company sets out the nature of business or objects of the company, there is deemed to be a restriction in the registered constitution on the business or activities in which the company may engage, unless the registered constitution expressly provides otherwise.

3. Limit the rights of members to attend and vote at general meetings:

In Section 34(1) of Act 992, a member of a company has the right to attend a general meeting and to speak and vote on a resolution before the meeting. However, in Subsection 2 , it is provided that:

a registered constitution of a company may provide that a member is not entitled to attend and vote at a general meeting unless the calls or any other sums of money presently payable by that member in respect of shares in the company have been paid.

4. Provision on different classes of shares:

Per Section 49(1) of Act 992,

The registered constitution of a company may provide for different classes of shares by attaching to certain of the shares preferred, deferred or any other special rights or restrictions, whether as regards dividend, voting, repayment or otherwise.

5. Provision of modes for the payment of dividend:

Per Section 76(5) of Act 992,

A registered constitution of a company may prescribe modes for the payment of dividend without reference to the resolution of the shareholders.