If you plan to set up a new company, you may have come across the term ‘Articles of Association’ and unsure what it means and how it’s relevant to your proposed start-up company. In this article, we'll closely examine this document to help you understand its importance in your company's structure.
What are Articles of Association?
You can think of ‘Articles of Association’ as your company’s written constitution, a set of formal, overarching rules that govern the running of your company, setting out what it can and can’t do.
In that sense, the Articles are a comprehensive statutory contract between the company and each of its shareholders - the shareholders have faith in putting their investment into the company knowing that there is a legally binding contract to which the company has to adhere.
It’s a legal requirement for every company to have a set of Articles of Association. They must be comprised in a single, written document set out in numbered paragraphs.
What are Model Articles?
Model Articles are the default Articles of Association provided by law, which a company can select if they opt against having their own bespoke Articles. They’re prescribed within the Companies Act 2006.
The Model Articles are made up of five distinct parts, covering each of the following areas:
- Limited liability of shareholders
- Shares and distributions
- Decision-making by shareholders
- Administrative arrangements
The Model Articles aren’t compulsory, but if a company doesn’t modify the Model Articles or provide their bespoke Articles in their entirety, then the Model Articles will apply.
It won’t always be appropriate for every new company to adopt the Model Articles, as some of the provisions contained within them may not be suitable or applicable for the company concerned. As such, it’s always wise to consider taking legal advice from a corporate lawyer before deciding on your Articles, as they’ll be able to guide you on what’s best suited for your company. If any modifications or entirely bespoke Articles need to be drafted, your lawyer can do that for you.
When do I choose my Articles of Association?
The Articles of Association should be selected at the point of your application to incorporate your company.
Alongside your choice of Articles of Association, you will need to submit your application form (IN01) and your Memorandum of Association, which is a document recording the details of the first shareholders of the company and their intention to form a company.
Your application can be done online, via a paper application to Companies House or via a company formation agent. A modest fee is payable to Companies House, which varies depending on how you submit your application.
Can I change my company’s Articles of Association in the future?
Yes. However, this can generally only be done via passing a ‘special resolution’, which is a vote amongst the shareholders in which at least 75% of eligible shareholders with the right to vote on the matter agree. In a private company, the resolution can be done in writing, known as a ‘written resolution’ instead of at a shareholder meeting only.
The resolution and amended Articles must be filed with Companies House within 15 days of the amendment's effect. This is very important, as failure to do so is a criminal offence committed by the company and every officer (i.e. director/s and company secretary) in default. This offence is punishable by a fine.
If you need help and support with regards to incorporating your company or drafting your company’s Articles, or you’d like to amend your existing company Articles, or just require some general advice in this area, you’d reach out to a corporate solicitor with appropriate expertise.
Appointing a solicitor, like those at LawBite, reassures you that your company matters will be handled properly and that your documents will be prepared appropriately for your needs. Your solicitor will also be able to help you with your Companies House filings, which, as we have outlined in this article, is a very important part of the process. LawBite offers expert assistance in commercial, corporate, and employment legal concerns.
About the author
Ashley Gurr is one of the many expert business lawyers at LawBite. Ashley has over 15 years of experience in private practice, helping SMEs and in-house for an international consultancy group advising on commercial agreements and a multi-national utility giant in a contract strategy role.