In an earlier article I spoke about the rules that govern a corporation. These can be either a specifically designed set of rules called a “Constitution” or a set of standard rules call “Replaceable Rules” set out in the Corporations Act 2001.
The question arises which is better?
In my view using a specially designed Constitution has many advantages over being governed by the Replaceable Rules set out in the Act including:
- A Constitution enables you to have several classes of shares with different voting rights, dividend rights and rights to capital upon winding up which can be useful in achieving objectives like income splitting, dividend streaming and selective control.