Articles of association solicitors

Every company must have articles of association prescribing regulations for the company.

Articles regulate the internal affairs of the company. They form the basis of a statutory contract between the members, and between each member and the company.

Format

Articles must be contained in a single document and be divided into paragraphs numbered consecutively.

Content

As under earlier Companies Acts, the state provides default articles of association for ease of use by those forming limited companies. The model articles of association for companies limited by shares, for example, are divided into five parts, covering the limited liability of shareholders; directors; shares and distributions; decision-making by shareholders; and administrative arrangements. The model articles for private companies limited by guarantee comprise four parts, dealing with the limited liability of members; directors; members; and administrative arrangements.

The model articles are by no means compulsory. The copy of the proposed articles of association that subscribers must prepare and register may adopt some of the model articles or none of them. However, if articles are not registered, or insofar as those that are registered do not exclude or modify the relevant model articles, those model articles will apply.

The contents of a company’s articles will be subject to, among other things, the provisions of the Companies Act 2006. Generally the CA 2006 overrules the articles, but it also recognises that not all of its provisions will be suitable for all companies and so, in a number of areas, it allows a company to include, vary or exclude, certain of its provisions.

Changing the articles of association

Procedure

While the general rule is that a company may amend its articles of association by special resolution or, if a private company, by written resolution, this rule is subject to certain exceptions.

The company must send a copy of any amended articles to the Registrar of Companies within 15 days after the amendment takes effect. Failure to do so amounts to a criminal offence committed by the company and every officer in default, punishable by a fine.

The Registrar may give notice to the company requiring it to rectify the breach within 28 days. Where the company complies with the notice, it will avoid prosecution for its initial failure to comply. If the company does not comply, it will be liable to a civil penalty of £200, recoverable by the Registrar as a debt, in addition to any criminal penalty that may be imposed.

Duomatic principle

Where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be. It has been held that articles of association may be amended by unanimous consent of all shareholders.

For any questions you may have concerning articles of association, our solicitors Barry Doherty or Neil Williamson can help you.