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The beginner’s guide to Articles of Association
27th Sep 2021
The beginner’s guide to Articles of Association - Linkilaw Solicitors
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The law of England and Wales mandates that a company must have articles of association and a memorandum of association to be formed as a legal entity. 

The memorandum of association is a legal statement signed by all initial shareholders or guarantors agreeing to form the company. The articles of association are written rules about running the company agreed by the shareholders or guarantors, directors and the company secretary. 

In this article, we discuss what the articles of association and model articles are, why using model articles is not always preferable for your company and how to amend them. 

What are the articles of association? And model articles?   

The articles of association is the document that specifies how a company is to be governed and what the internal rules are.   

This document includes provisions such as how the board of directors ought to make decisions on the day-to-day tasks and responsibilities of the company as well as other decisions that are not referred to in the shareholder’s agreement  

While the shareholder’s agreement is a private document, the articles of association is a public document. These documents need to work cohesively as they specify the relationship between shareholders and the directors of the company. If there are contradictions, it can be difficult to make decisions and be aligned with the correct procedures.   

The model articles of association are the standard default articles a company can use. They are prescribed by the Companies Act 2006 and replaced Table A from 1 October 2009.  

You can find here examples of model articles of association for private companies limited by shares, private companies limited by guarantee and public companies. 

This document is automatically adopted until a company approves and adopts other bespoke articles. However, while the model articles are a good starting point, this “one-size-fits-all” set of rules is not always the best long-term document for a company.   

Why don’t the model articles always benefit a company?  

It can be as soon as the early stages of development that inconsistencies arise in the model articles with how the company is run on a day-to-day basis. Therefore, once your company begins to grow and develop, it is recommended that you adopt bespoke articles of association for your company, or create bespoke articles from the outset.   

Some situations when model articles may not be suitable for your company would be in the case you are planning to create more than one class of shares, if there will be alternate directors or if you would like to restrict or grant additional powers to directors and if you would like to hold meetings by electronic means.   

One of the important points to note is the model articles do not contain all the rules that a company needs to consider so if a specific decision or rule is not covered, this will be left open to interpretation.  

You should review your company’s articles of association regularly to ensure the provisions are aligned with the company’s corporate structure and governance.   

Articles of Association - women entrepreneurs - Foto de Alexander Suhorucov en Pexels

Amending your articles of association  

It is possible to amend a company’s articles of association at any point after incorporation.  

Provided there is a legitimate reason for making changes, you can amend the company’s articles of association by passing a special resolution of the shareholders. A special resolution requires the approval of at least 75% of the shareholders. This can be done either by a written resolution that is signed by the shareholders or by casting votes at a general meeting of the shareholders.   

Once the changes are approved, you will need to send the updated articles as well as the special resolution to Companies House.   

How could we help  

We recommend seeking legal advice from a corporate solicitor before amending your articles of association and especially when drafting a shareholder’s agreement to make sure they are both consistent and aligned.   

At Linkilaw Solicitors, we are here to help, share our market knowledge and guide you through key concepts and provisions for your legal documents.   

Book a call with our experienced legal team at a time that suits you.     

Our legal commentary is not intended to be a comprehensive review of all developments in the law and practice. Please seek legal advice before applying it to specific issues or transactions. 

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