Part 6 Articles of association
June 2011
A company must have articles of association (hereinafter referred to as articles) which are its internal regulations and are the most important component of its constitution [Note 1] as they state what a company can and cannot do. The articles form a contract between the company and its shareholders. They ensure that the company is run efficiently and smoothly. The articles are legally binding on the company and all its shareholders.
Since 1 October 2009 a company will be deemed to have adopted the model articles on incorporation unless it registers its own bespoke articles or submits specific amendments to the model set. [Note 2]. Model articles can be found here.
75.58 Transitional arrangements
Companies incorporated before 1 October 2007 will already have a set of articles. These will remain in force unless the company chooses to change them (see paragraph 75.61). Companies incorporated between 1 October 2007 and 1 October 2009 were deemed to have adopted the new Table A unless they had articles of their own [Note 3].
The articles now contain items that were previously in the memorandum of association, i.e. the company name, the country its registered office is located in, whether its liability is limited by shares, details of its share capital and an association clause which has been signed by subscribers to indicate they were taking a share in the company. Additionally the articles generally cover, amongst other things, the appointment, removal and powers of directors, rules governing meetings, voting rights, dividends and the transfer of shares.
Generally a company may amend its articles by passing a special resolution (see paragraph 75.194) [Note 4]. However, a company may include additional clauses in its articles to make changing them more difficult than passing a special resolution. These clauses are called “entrenched provisions” [Note 5]. The registrar of companies must be given notice of any “entrenched provisions” [Note 6]. Unless agreement is made in writing either before or after the alteration, a company may not amend its articles in such a way that a member is required to increase his/her shareholding or liability [Note 7]. Where a company amends its articles it must send a copy of the amended articles to the registrar of companies within 15 days of the changes taking effect. An offence is committed if the company fails to send a copy of the amended articles to the registrar of companies, it and every officer who is in default may be liable on summary conviction to a fine [Note 8].
[Back to Part 5 Memorandum of association] [On to Part 7 Model articles of association]