What is a company constitution?

Question:

Prepare a company constitution s134 and s135 company internal management rule.

Company constitution is a manually formed document of rules and regulations for a particular company. The company constitution specifies and provides a set of pre-planned rules for the owner, managers, workers and the shareholders of the company. The constitution of the company should be prepared after the registration under the government of theta country. According to Boros and Duns (2010), the government will allow the person or group of persons to form their company after having the trade license. After starting the business activity, the company should provide tax to the government in half-yearly or yearly basis. The constitution of the company combines the each stakeholder of the company to the objectives and the ultimate goal of the company.

A company should have its own constitution. If a company does not have a constitution, then the company will be presiding over by the Companies Act 1993. In United Kingdom, the first company Act was generated in 1844 and that was Joint Stock Companies Act 1844. The constitution of the company will specify the rights, powers and duties of the stakeholders. All the middle and lower level managers and workers will need to follow the constitution of the company. Along with them, the board of directors of the company will need to follow the constitution. In the words of Goode (2011), the constitution of the company will make the company as a separate entity. The companies those not having their own constitutions will be considered as formal group of companies. Therefore, the constitution is required for the successful running of the business along with the sharing profitability among the shareholders. Following a constitution, the internal organisational structure will set in a systematic manner. A systematic work structure of the company will develop the framework of the company so that the business activities will not be considered as illegal.

According to the new Companies Act 2006, the constitution of the company should contain different components, like name of the company, aims and objectives of the company, Powers of the stakeholders, membership rules, management committee, officers, meetings, finance and dissolution of the constitution. Along with these, the constitution will need to have the necessary sections of Companies Act 2006. Some of the important and necessary sections are as follows:

Section 1: Section 1 declared that every newly formed company should be registered under the company act and UK government. Along with this, the company will have to maintain and fulfil all the responsibilities towards the company, customers, suppliers and the society (Kohn et al. 2004).

Section 113: This section explains that every company should keep a register of its members. In the register book the members’ name and the necessary information should be recorded. The register will also contain the name of the shareholders and the respective numbers of the shares. In case of joint shareholders, the register will need to state each name of the joint stockholder.

Why is a company constitution important?

Section 116: According to Daly (2011), this section has the rights of the register members of the company for inspection. The members have the rights for inspecting the register of the company and the details of the financial statements of the company along with the profitability structure and profitability of shares.

Section 117: This section explains the responses to request for inspection in register of members. The members can request directly to the company or through the court. If the application goes through the court to the company, a notification should be send to the person of the request.

Section 147: Laws (2010), through this section, the members have the right to enjoy the information about the company. After receiving request from the members, the company should send the necessary documents regarding the information to the members’ address. If the company becomes unable to send through postal address, in that case the company needs to provide that information via email of the members.

Section 172: According to the section, the director of the company should act in a profitable way that the company and the stakeholders of the company will be benefitted. According to the section, the company needs to maintain good relationship with the customers, suppliers and other members of the company. The company should conduct a profitable business activity to maintain the reputation of the business enterprise.

Section 43: The section provides explanation about the contracts between the companies. Under the section, the contract can be made between the companies or the persons’ who have authority on the behalf of the company (Camacho, 2012).

The constitution of the company provides a great effect on the business enterprise as well as the members of the company. The constitution binds the each stakeholder of the company towards the goal and the objectives of the business.

The constitution assignment work has taken place on the company named ASIC. ASIC is a Japanese company that produce athletic equipments like sports shoes and other necessary sports equipments. The company is having more than 6000 employees. The company has expanded its business through worldwide. Therefore, the company needs to prepare a constitution that will focus on the different economical and business environment. All the necessary information regarding the company will come under section 1 Companies Act 2006 (Gomadthinking.com, 2015).

Under section, 172 the company will need to prepare the mission and the ultimate vision of the company. The vision of the company is to become a global preferable sports brand. For fulfilling the vision, the company will need to focus on different objectives like, generating a passion amongst the workforce, developing the employees for enhancing their skills and providing a periodical profitable business results.

According to Collins (2010), in the constitution, the power will have the authoritative actions of the members to carry out the business activities to complete the missions and the vision. In this part, the company will generate a team for up gradation of the business activities and the profitability factors. The members of the company will need to have the power of raising money in the market, employ paid and skilled workers, power to conduct research activities, power to have conduct a partnership work with other company and make necessary rules for the business activities.

Components of a company constitution

According to section 113, all the members will have their recorded information through a register. The members of the company will have the power of inspection of company’s necessary information and financial factors. Under section 43, the company will be able to conduct a partnership activity with other company and become a share partner.

Management committee is required for the company, because the ASICS is global brand and needs to focus the business activities globally. The management committee will include the board of directors, chief executive officers and different managers for different business activities. The other members of the company will nominate the board of directors and they will be selected according to their knowledge and skills (Grist, 2014).

ASICS needs different officers for different business activities for different countries. The officers can be president of a particular business unit, chairpersons, secretaries and other line managers. In the annual general meeting, all the officers will need to be present with their respective reports in the meeting.

The company ASICS will need to conduct business meetings quarterly, half-yearly and yearly. As per the Companies Act, in the general meetings a fix numbers of board of directors and other business development managers need to be present. According to section 172, in the general meeting the profitability factors of the stakeholders will be discussed and need to employ to them. In the general meeting, the financial statement of each business unit will need to be discussed. The necessary changes in the rules and the policies of the company also need to be discussed in the general meetings (Mitchell, 2011).

In the finance part, the company needs to allocate clearly the sources of the finance for the business activity. The shareholders of the company are the owners of a specific number of shares and according to that; they will receive their profit sharing parts.

As per the changing business environment and global economic condition, the constitution of the company may need to change, because the business activity should run on the present business scenario of worldwide. The key members of the company will have the authority to change the constitution when it is necessary. In this case, the opinion of employees should take into consideration.

According to Rosen (2014), the dissolution takes place when the management committee needs to wind up. In that case, the business enterprise needs to conduct a special meeting among the key people of the company. In the meeting, the members need to discuss about the payments and the debts to the members. The payables should be clear after the meeting, so that no disturbance can take place.

Conclusion:

The constitution of the company will specify the rights, powers and duties of the stakeholders. All the middle and lower level managers and workers will need to follow the constitution of the company. Along with them, the board of directors of the company will need to follow the constitution. The constitution of the company will make the company as a separate body.

Reference list:

Boros, E. and Duns, J. (2010). Corporate law. South Melbourne, Vic.: Oxford University Press.

Goode, R. (2011). Principles of corporate insolvency law. London: Sweet & Maxwell.

Kohn, S., Kohn, M. and Colapinto, D. (2004). Whistleblower law. Westport, Conn.: Praeger.

Mitchell, R. (2011). Law, corporate governance and partnerships at work. Farnham, Surrey, England: Ashgate Pub.

Daly, E. (2011). Competing Concepts of Religious Freedom Through the Lens of Religious Product Authentication Laws. Eccles. law j., 13(03), pp.298-332.

Laws, D. (2010). A Company of Legend: The Legacy of Fairchild Semiconductor. IEEE Annals Hist. Comput., 32(1), pp.60-74.

Rosen, K. (2014). Company Law and the Law of Succession Droit Commercial/Commercial Law. American Journal of Comparative Law, 62(-1), pp.387-405.

Camacho, J. (2012). Mayo “naysâ€Ã‚Â: The Supreme Court says no to patenting laws of nature. Journal of Commercial Biotechnology, 18(3).

Collins, H. (2010). Harmonisation by Example: European Laws against Unfair Commercial Practices. Modern Law Review, 73(1), pp.89-118.

Grist, E. (2014). EU Legal & Regulatory Update – June 2014. Journal of Commercial Biotechnology, 20(3).

Gomadthinking.com, (2015). Asics UK | Go MAD Thinking. Available from: https://www.gomadthinking.com/differences-made/measurable-differences/asics-uk/ [Accessed 19 Jan. 2015].