INTERNAL GOVERNANCE RULES: What are

internal governance rules used for in

Company Law?
1.

Common law

They are rules to govern the internal

management and administration of the
Co.
Internal governance rules govern
matters such as:
- the rights of members;
- the conduct of members and directors
meetings;
- the directors remuneration, appointment
and
powers.
Every company must have internal rules,
found in
the companys constitution.
2.
Now governed by the provisions of
the CA 2001:

a) S. 134: Constitution, replaceable

rules (RR) or a combination of both.
b) C. 135(1): Application of replaceable
rules
i) Before 1st July 1998: Not automatic.
ii) After 1st July 1998: Automatic.
iii) S 135(2), CA 2001: RR may be
replaced or modified by the
companys constitution.
iv) A constitution can be amended
(altered) by Special Resolution: at
least 21 days notice (28 days for
public listed companies) is required
and 75% of members (present and
entitled to vote) vote in favour: s
136(2).
v) RR do NOT apply to one propriety
company runs by one sole
shareholder and one sole director. (S
135, CA 2001)
c) S. 136, CA 2001: Now a company
may either adopt or modify or repeal a
constitution.

3.
S 140, CA 2001: RR that apply to a
company has the effect of a contract. RR
operate as statutory contract.
4.
S 135(3), CA 2001: Effect of the
breach of RR. Not of itself a
contravention of this CA 2001. Breach of
RR does not result in civil and criminal
liability.
4.1 How to enforce breach?
By way of declaration or an injunction.