What exactly are the company's bylaws?
- A Constitution is an important legal document
- It sets out how a company is managed and operated
- It can be regarded as the company's internal rulebook
Evolution of the Constitution
- Under the Companies Act 1965, it was known as:
- Memorandum & Articles of Association (M&A)
- After the Companies Act 2016 came into effect:
- M&A was replaced by the Constitution
Is a Constitution Mandatory?
- Under the Companies Act 1965
- A company was required to prepare an M&A during incorporation
- Under the Companies Act 2016
- A company is not required to adopt a Constitution
- As the Act already provides default rules that companies may rely on
Why Do Some Companies Still Adopt a Constitution?
- To suit the company's specific business needs
- To clearly define the rights and responsibilities of shareholders and directors
- To reduce the risk of future disputes
- To ensure proper corporate governance and compliance
Which Types of Companies Use a Constitution?
- Sdn. Bhd. (Private Limited Company)
- Berhad (Public Limited Company)
- Both may adopt a Constitution if necessary
What About LLPs and Partnerships?
- LLPs (Limited Liability Partnerships) and Partnerships do not require a Constitution
- However, partners are encouraged to sign a Partnership Agreement that clearly sets out:
- Rights of the partners
- Responsibilities of the partners
- Profit-sharing arrangements
What If There Is No Partnership Agreement?
- LLP disputes are generally governed by the LLP Act
- Partnership disputes are generally governed by the Partnership Act
Summary
- A Constitution serves as a company's internal governing document
- Although it is no longer mandatory under the Companies Act 2016
- Many companies still adopt one to strengthen governance and minimise future disputes