Company Constitution: Adopting, Amending and Entrenching It

An Sdn Bhd can operate for years without a single document titled “constitution” — and that is entirely lawful under Malaysian law. The Companies Act 2016 made a constitution optional for most companies, a major shift away from the era of the mandatory Memorandum and Articles of Association (M&A). The question is no longer “what must our constitution contain”, but “do we need one at all, and if so, how do we adopt it, amend it, or lock it down?”

Does your company really need a constitution?

Section 31(1) provides that a company, other than a company limited by guarantee, “may or may not have a constitution”. This means a company limited by shares (Sdn Bhd or Bhd) and an unlimited company are free to choose.

If a company chooses not to have a constitution, section 31(3) makes the Act itself its rulebook: the rights, powers, duties and obligations of the company, of each director and of each member are as set out in the Act. This means the “default” provisions of the Act — from meeting quorums to the appointment of directors — apply automatically. For many small private companies, this default framework is already sufficient.

Conversely, if a company has a constitution, section 31(2) allows the constitution to modify the provisions of the Act — but only to the extent the Act permits. A constitution cannot override mandatory provisions.

Type of company	Constitution	Reference
Limited by shares (Sdn Bhd / Bhd)	Optional	s.31(1)
Unlimited	Optional	s.31(1)
Limited by guarantee (CLBG)	Mandatory, lodged at incorporation	s.38(1)–(2)
Old companies before CA 2016	Existing M&A continues as constitution	s.619(3)

When is a constitution mandatory?

Only for a company limited by guarantee (CLBG) — typically non-profit bodies, clubs and foundations. Section 38(1) provides that such a company “shall have a constitution”, and section 38(2) requires that constitution to be signed by the promoters and lodged with the Registrar when the company is incorporated. The constitution must state that the company is limited by guarantee, the objects of the company, as well as the powers and number of its members (s.38(3)). Any provision that purports to divide the company’s undertaking into shares, or to confer a right to divisible profits, is void (s.38(4)–(5)).

How does a company adopt a constitution?

For a company limited by shares, the process is set out in section 32:

• Pass a special resolution. Section 32(1) provides that adoption “shall be by special resolution”. Under section 292, a special resolution is a majority of not less than 75% of members entitled to vote, with notice of not less than 21 days.
• Ensure it does not conflict with the Act. A constitution has no effect to the extent that it conflicts with or is inconsistent with the Act (s.32(2)).
• Lodge it with the SSM within 30 days. Section 32(4) requires the company to lodge the constitution with the Registrar within 30 days of the date of adoption.

Failure to lodge in time is an offence: the company and each of its officers may be fined up to RM50,000, plus RM500 for each day the offence continues after conviction (s.32(5)).

Once adopted, the constitution becomes a statutory contract. Section 33(1) binds the company and its members as if the constitution had been signed and sealed by each member, containing each member’s covenant to observe all its provisions. Money payable by any member under the constitution becomes a debt due to the company (s.33(2)).

What can be included in a constitution?

Section 35(1) allows a constitution to contain provisions on the objects of the company; restrictions on its capacity, rights or powers; matters required by the Act; and any other matters the company wishes to include.

An objects clause carries significant consequences. If the constitution states the objects of the company, section 35(2)(a) restricts the company from carrying on any business or activity outside those objects — even though the company has full capacity and power to achieve those objects (s.35(2)(b)). For this reason many modern companies deliberately omit an objects clause so as to retain full capacity.

Note that section 39 abolishes the doctrine of constructive notice: no one is deemed to know the contents of a constitution merely because it is registered with the Registrar or available for inspection at the registered office — except for documents relating to a charge instrument.

How is a constitution amended?

Section 36 provides the ordinary amendment route:

1. Special resolution. A company that has a constitution may, by special resolution, amend or alter its constitution — “unless the constitution itself prohibits” that amendment (s.36(1)).
2. Effect. The amendment binds the company and its members from the date the resolution is passed, or a later date specified in the resolution (s.36(2)).
3. Lodge within 30 days. The company must notify the Registrar and lodge a copy of the amended constitution within 30 days of the date of the special resolution (s.36(3)).

The fine for late filing under section 36 is lower than for adoption: up to RM10,000, plus RM500 a day for a continuing offence (s.36(4)).

Action	Section	Approval required	Filing deadline	Maximum fine
Adopt a constitution	s.32	Special resolution (75%)	30 days	RM50,000 + RM500/day
Amend a constitution	s.36	Special resolution (75%)	30 days	RM10,000 + RM500/day
Court order	s.37	Court order	30 days	RM10,000 + RM500/day

Can a constitution be “entrenched”?

This is a subtle question. The phrase “unless the constitution itself prohibits” in section 36(1) provides the basis for entrenchment: a company can write into its constitution that certain provisions cannot be amended, or can only be amended on stricter conditions (for example, unanimous consent rather than merely 75%). This protects the rights of minority shareholders or founders in a joint-venture agreement.

However, there is a limit. The settled common law principle is that a company cannot completely deprive itself of its statutory power to amend its constitution — it cannot fetter itself out of that power, whether by agreement or by a provision in the constitution itself. Entrenchment restricts amendment, but cannot lock it away permanently and absolutely. (The precise case authority for this principle should be checked by a human reviewer — see verificationNeeded.)

This is where section 37 acts as a safety valve. The Court may, on the application of a director or member, order an amendment of the constitution if satisfied that it is impracticable to amend using the procedure in the Act or the constitution itself. “Impracticable” requires evidence of failed attempts — such as repeated quorum failures or a deadlock — not mere inconvenience. In Chew Meu Jong v Lysaght (Malaysia) Sdn Bhd [2018] 1 LNS 1132, the court allowed an amendment when a transfer of shares left only a single Class A shareholder, making the quorum requirement in the constitution impossible to meet. A court order must be lodged with the Registrar within 30 days (s.37(2)).

What happens to old companies from before 2016?

Companies incorporated under the Companies Act 1965 need not rush to prepare a new constitution. The transitional provision of section 619(3) provides that the M&A of an existing company in force at the commencement of the 2016 Act — including Table A if adopted — continue in force as if made under this Act, “unless otherwise resolved by the company”. That old M&A now becomes the company’s constitution. The company may, at any time, review and amend or repeal it by special resolution under section 36.

Next steps

Before adopting or amending a constitution, consider whether the Act’s default framework already meets the company’s needs — many small Sdn Bhds do not need a separate constitution at all. If a constitution is needed (for example for special shareholder rights, share classes, or joint-venture terms), draft it carefully: avoid an unnecessary objects clause, and use entrenchment provisions only where minority protection is genuinely required. Ensure the special resolution is passed with proper 21 days’ notice, and mark the 30-day filing deadline in the company secretary’s compliance calendar. For deadlock situations, consider the section 37 route early, as it requires evidence that the usual procedure is genuinely impracticable. Obtain legal advice for amendments that touch on share class rights or members’ obligations.