WOW Limited and Urban PTY Contract Can Be Terminated As Urban Pty Limited Constitution Only Permits To Manufacture Furniture.
For the time of registration of Urban Pty Ltd, a constitution must attached with registration form which specifies that the company will manufacture furniture only and all of their members have signed it with mutual consent. According to section 125, constitutions limits powers and set out objective. It is clear that the Urban Pty Ltd have no power to enter in business of colorful mobile phone cases. Constitution law says, the companies which have constitution may contain express restrictions to company’s power to enter into a different business because it will contrary with the constitution objects. If Urban Pty Ltd enters into the business of colorful mobile cases become contrary according to its constitution. Section 125 of corporation act 2001
Replaceable rule can be used to solve relevant cases like this if the company is registered after 1 July 1998. Through replaceable rule a company becomes able to modify or displaced their constitution. A company adopts constitution on the time of registration with the consent of all its members. Constitution can be modifies either in case of special regulation or by the order of court. A company can modify or repeal its constitution by special resolution. After getting permission of special resolution in constitution by ASIC. The modified copy of constitution must reach within the 14 days. Sectin 136 & 135 from corporation act 2001.
Urban Pty Ltd must have to get approval for special resolution in constitution by replaceable rule from ASIC. If permission granted then Urban Pty Ltd must have to submit Modifies copy of its constitution to ASIC within the 14 days of its approval. It will have the effect on the contract exists between members to take up the additional share of the company or it will increase the liability of some members which don’t want to take more share. Section 137 & 140 from corporation act 2001
In short the Urban Pty Ltd enters into the business of colorful mobile cases by modifying the constitution through replaceable rule. For this purpose Urban Pty Ltd must have to get approval from ASIC by court.