When to update your company constitution
Most company constitutions become outdated within 5-10 years. Here are the triggers for review.
Update your company constitution when ownership changes, share structure changes, governance needs change, or you’re preparing for investment, sale, or family succession. Review every 5 years even without specific triggers – corporations law and best practice both shift.
Ownership changes
New shareholder joining. Significant shareholder exiting. Founders parting ways. Family members coming into ownership through inheritance or gift. Each is a chance to revisit transfer restrictions, decision thresholds, and exit mechanics.
Share structure changes
Issuing a new share class for an investor. Splitting voting and economic rights. Creating an employee share scheme. Each requires constitution updates to govern the new class.
Preparing for investment
Investors will scrutinise the constitution. Tag-along, drag-along, pre-emption, decision thresholds, and director appointment rules all matter. Update before fundraising rather than during due diligence.
Preparing for sale
Buyers expect a clean constitution with current shareholder rules. Old constitutions slow down M&A processes. Update 12-18 months before a planned sale.
Family succession
When founders bring children into the business, the constitution needs to handle the new dynamic – decision rules, transfer restrictions, and dispute resolution. Often paired with a shareholder agreement.
Summary
Most company constitutions become outdated within 5-10 years. Here are the triggers for review.
Talk to Sam about your situation
If this article raised questions for your own circumstances, Sam Michele offers free 20-minute initial consultations. Learn more about our company constitution work, or book a consultation.
Related reading
Disclaimer: This article is general information only and does not constitute legal advice. Estate planning is deeply personal - every family's circumstances are different. For advice specific to your situation, please contact Rosewood Succession Solicitors.