An Australian proprietary company is governed either by the "replaceable rules" in the Corporations Act, by its own constitution, or by a mix of the two. A Pty Ltd doesn't need a constitution: if it has none, the replaceable rules apply by default. Most foreign-owned subsidiaries still adopt a short constitution, because a few default rules fit badly with a board split between Australia and overseas.
Whatever rulebook you choose, the mandatory parts of the Corporations Act still apply, including the requirement for a resident director.
How the two systems fit together
ASIC's guide to company rules sets out three points that resolve most confusion:
- If you want to change any replaceable rule, even part of one, the company needs a constitution.
- If a constitution doesn't deal with a topic that a replaceable rule covers, the replaceable rule fills the gap.
- A constitution operates as a contract between the company and its members, directors and secretary, and between the members themselves.
The replaceable rules don't sit in one chapter. They are spread through the Act and flagged individually, with section 141 listing them in a table.
The sole director and shareholder exception, and why subsidiaries don't get it
The replaceable rules don't apply to a proprietary company whose sole director is also its sole shareholder; special rules apply instead under section 135(1). Founders sometimes assume this covers their subsidiary. It almost never does. A wholly-owned subsidiary's shareholder is the parent company, and section 201B allows only an individual aged at least 18 to be appointed as a director. So the director and shareholder are always different persons, and the replaceable rules apply unless a constitution displaces them.
Default rules that catch out foreign-owned boards
These replaceable rules are taken from ASIC's reproduction of the rules. Each one is workable, but each needs checking against how your board runs.
| Rule | What the default says | Why it matters for a split board |
|---|---|---|
| Quorum for directors' meetings (s248F) | 2 directors, present throughout, unless the directors decide otherwise | A two-person board with one director overseas needs both present for every meeting |
| Circulating resolutions (s248A) | Passed when all directors entitled to vote sign the document | One unreachable director blocks a written resolution |
| Directors appointing directors (s201H) | A director appointed by the board of a Pty Ltd must be confirmed by the company within 2 months, or the appointment ends | A replacement resident director can drop off if the parent forgets to confirm |
| Alternate directors (s201K) | A director can appoint an alternate with the other directors' approval; ASIC must be notified | Useful for overseas directors in a different time zone; the alternate still needs a Director ID |
| Removing a director (s203C) | A proprietary company may remove a director by resolution | The parent, as sole member, controls the board composition |
| Signing negotiable instruments (s198B) | Any 2 directors, unless the directors decide otherwise | Cheques and similar instruments need two signatures by default |
| Refusing share transfers (s1072G) | Directors of a Pty Ltd may refuse to register a transfer for any reason | Gives the local board a say in exits unless the constitution limits it |
| Director remuneration (s202A) | Paid as the company decides by resolution | Fees for a local director should be approved by the member, not just agreed by email |
The members' meeting quorum is also 2 under the replaceable rules (s249T), but ASIC notes a company with one member can pass a resolution by recording and signing it. That is how most subsidiaries make shareholder decisions.
Clauses worth including in a subsidiary constitution
There's no prescribed form. In practice, constitutions for foreign-owned subsidiaries tend to deal with:
- A one-director quorum, or a quorum that counts directors joining by video. Matched with a circulating resolution clause that works when one director is unavailable.
- Appointment and removal of directors by written notice from the holding company. Simpler than calling a members' meeting, and it keeps control visibly with the owner.
- Who signs documents and how. Who can execute contracts, and whether electronic signing is permitted.
- Share classes and transfer rules, if anyone other than the parent will ever hold shares, such as employees under an incentive plan.
- A wholly-owned subsidiary clause. Section 187 of the Corporations Act can allow a director of a wholly-owned subsidiary to act in the interests of the holding company, but only where the constitution expressly authorises it and other conditions are met, including about the subsidiary's solvency. Ask your lawyer whether it suits your group and how it interacts with each director's duties; see director duties in Australia.
- Indemnity and insurance for officers, within what the Act allows.
None of these clauses can switch off the mandatory rules: the resident director requirement, directors' duties, insolvent trading and the ASIC lodgement obligations apply regardless.
Adopting, changing or repealing a constitution
The process, from ASIC's adoption page:
- Before registration: each member agrees to the constitution in writing.
- After registration: the company passes a special resolution, which needs at least 75% of the votes cast. For a single-member subsidiary, the parent signs the resolution.
- To change or repeal: another special resolution. If the constitution is repealed and not replaced, the replaceable rules apply again.
A standard proprietary company doesn't send ASIC a copy. Public companies, and proprietary companies that have applied to become public, must lodge Form 205 with the resolution and the constitution within 14 days, or late fees apply. Members can ask for a copy, and the company must send it within 7 days of a written request.
One special case: a special purpose proprietary company must have a constitution to get the reduced annual review fee. That fee is $70 instead of $342 for an ordinary proprietary company in 2026–27. It doesn't need to send ASIC a copy, but must keep one with its records.
When the parent's own documents get in the way
Two common mismatches:
- The group's delegations of authority say one thing, the Australian constitution another. If group policy says the regional CFO approves contracts but the constitution leaves signing to the directors, the Australian board should formally delegate that authority and minute it.
- The parent's articles are copied in. Clauses about "the board of managers" or a supervisory board make no sense under Australian law and leave gaps that the replaceable rules then fill, often in ways nobody intended.
Service providers will usually ask for the constitution at onboarding. Banks read it to confirm who can open and operate accounts, and AML/CTF-regulated providers use it to understand who controls the company.
Where we fit
We review the constitution at onboarding so our director knows how decisions are made, and we can work with the existing document or the replaceable rules. Drafting or amending a constitution is legal work for your lawyer; we don't provide it. If you're setting up from scratch, see setting up an Australian subsidiary for where the constitution fits in the sequence.
General information current at 27 October 2026, not legal advice. Have an Australian lawyer review any constitution before you adopt it.
Frequently asked questions
Do we have to lodge our constitution with ASIC?
Not for an ordinary proprietary company. Public companies, and proprietary companies that have applied to become public, lodge Form 205 within 14 days of the resolution. Keep the signed constitution with the company records.
Can a constitution remove the need for a resident director?
No. The requirement for at least one director who ordinarily resides in Australia comes from section 201A of the Corporations Act, and a constitution can't override it.
Can we just use our parent's articles of association?
Not as they are. Foreign articles are written for another country's company law, and no clause can override the mandatory Corporations Act rules. Use them as a brief for an Australian lawyer, not as the document.
Our company has no constitution. Is that a problem?
No. The replaceable rules apply automatically. It only becomes a problem when a default rule, such as the two-director quorum, doesn't suit how your board actually works.
Official sources
- ASIC: Company rules and constitutions asic.gov.au
- ASIC: The replaceable rules for company governance asic.gov.au
- ASIC: Adopt or change a company constitution asic.gov.au
- ASIC: Shareholder rights and responsibilities asic.gov.au
- Federal Register of Legislation: Corporations Act 2001 legislation.gov.au
Checked against these sources on . Fees, thresholds and forms change: confirm with the source before you lodge.
General information about Australian law and practice, not legal or tax advice for your circumstances. Check the official sources, or ask your adviser, before you act.