The corporate constitution as a statutory contract: Artifice or anachronism?

Abstract

A company’s constitution provides the legal foundation for the relationship between a company and its directors and members. That relationship is deemed by statute to have effect as a contract between the company and the directors and between the company and its members, and amongst members between themselves. This statutory deeming of the constitution as a contract has been a feature of company law across the common law world since the 1850s, but the application of contract law to the construction and operation of the constitution raises difficult conceptual problems. In this article, it is argued that the deeming of the constitution as a contract is an anachronism based on a 19th century conception of a company as the embodiment of a group of incorporators. It is argued that changes in 1998 in Australia have removed this conceptual foundation and now formally recognise the company as a distinct legal entity arising from registration, rather than the legal embodiment of the collective members. It is argued that the constitution should be recognised as having statutory force, rather than continuing to deem it to have contractual force.