Understanding Company ConstitutionCompany Constitution

The Company Constitution is a legal document that defines the framework for a company’s operations and sets out the rights, duties, and responsibilities of its shareholders and directors. It specifies the company’s name, type of business, capital structure, and liability while outlining its objectives, governance rules, and decision-making processes.

In Malaysia, the Companies Act 2016 replaced the need for separate documents such as the Memorandum of Association and Articles of Association. Under the new framework, the Company Constitution is a single document that companies can adopt to regulate their internal management. While it is optional for most companies, some, like those limited by guarantee, are required to have a constitution.

When a Company Constitution is adopted, it must be submitted to the Companies Commission of Malaysia (SSM) during the incorporation process. The company must comply with the terms outlined in the constitution, ensuring it aligns with the Companies Act 2016 and supports the business’s objectives.

 

What Does a Company Constitution Contain?

Key elements of a Company Constitution in Malaysia often include:

  • Name Clause: Stating the company’s official name.
  • Registered Office Clause: Defining the address of the company’s registered office.
  • Objectives Clause: Describing the primary purpose of the company.
  • Liability Clause: Outlining the liability of members, whether limited by shares or guarantee.
  • Capital Clause: Specifying the amount of share capital and its division.

Additional provisions can address critical matters such as rules for transferring shares, limitations on the number of members for private companies, profit distribution, and the appointment and removal of directors.

A well-drafted Company Constitution helps prevent disputes, ensures compliance with Malaysian laws, and provides clear guidelines for managing the company effectively. Whether starting a business or restructuring an existing one, understanding and preparing a Company Constitution is essential for long-term success.