1.Prior to the 1st July, 1998 companies formed under the Corporations Act were required to have a constitution consisting of a memorandum of association and articles of association. Since the 1st July 1998 companies don't need a constitution, though they still can have one, or they can rely on the "replaceable rules".

(a) What is the nature and function of the replaceable rules? (s134 & 135 and s141)

(b) Which companies must or should have their own constitution? Which companies can rely on the replaceable rules and which companies may have a combination of both replaceable rules and a constitution?

2. What requirements must be met if a company wishes to have its own constitution? (s136)

3.What powers does a company have to alter:

(a)its constitution?

(b)the replaceable rules?

(c) Can the company constitution be altered otherwise than by the company?

(See s9 & 136(2), 135(2))

4.The shareholders of Action Pty Ltd intend to pass a special resolution altering the company's constitution to provide that the number of members of the company be limited to seventy.

Advise them.

5.Can the company constitution be altered so as to require a member to take more shares or to increase a member's liability to contribute to the company's share capital?

6. The company's right to alter it constitution was subject to the change being bona fide for the benefit of the Co as a whole. What is the principle in Gambotto v WCP Pty Ltd [1995] 13 ACLR 342 in respect of changing its constitution to expropriate a shareholders shares?

7.Questions 7 to 9 consider the effects of Section 140(1) of the Corporations Act?

The Constitution of A. Pty. Ltd. provides, inter alia,

"In the event of the death of any member his or her shares shall be purchased and taken by the directors at such price as is certified in writing by the auditor to be in the auditor's opinion the fair value thereof at the date of death ... unless they otherwise agree the directors shall take such shares equally between them."

Quayle, a director dies and his shares are valued by the auditor.Robinson, one of the remaining directors, does not wish to take any of Quayle's shares.Is he legally bound to do so?

8.Angus is a member of B. Pty. Ltd.The Constitution of B. Pty. Ltd. provides, inter alia, as follows:

"Angus shall be employed as the company's factory manager for a period of three years commencing one calendar month after the date of incorporation of the company at a salary of $50,000.00 per annum."

Angus informs you that the company has at all times refused to employ him as its factory manager.Advise him.

9.(a) The Constitution of D. Pty. Ltd. provides, "that whenever a dispute arises between the company and a director concerning the terms of the director's appointment, such dispute shall be referred to arbitration".

Maria is a director of D. Pty. Ltd., but she does not hold any shares in the company.A dispute arises between Maria and the company when the company reduces her salary, bonuses and travel expenses as a director.Maria wishes to refer the dispute to arbitration, but the company informs her that it intends to take the matter to court.Advise Maria.

(b) Maria is appointed as the Managing Director of D. Pty. Ltd under its constitution for life. After a falling out with the board and shareholders the company constitution is amended giving the board the power to remove Maria. Advise Maria of her rights.