Articles of Association

What are Articles of Association?

Articles of association set out the rules that the company, its directors and shareholders must follow. They form a central part of the company’s constitution and are filed publicly at Companies House.

When a company is incorporated, it also has a memorandum of association. This records the initial subscribers’ agreement to form the company and cannot be amended after incorporation. Unlike the articles, it does not govern the company’s ongoing management.

A company can use the standard model articles prescribed under the Companies Act 2006 or adopt articles tailored to its particular requirements.

What can the articles cover?

Depending on the company, its articles may address:

• the appointment, removal and powers of directors;
• how directors make decisions;
• shareholder voting and decision-making;the issue of new shares;
• rights attached to different classes of shares;
• restrictions on transferring shares;
• rights of first refusal and other pre-emption rights;
• compulsory share transfers in specified circumstances;
• the payment of dividends;
• proceedings at board and shareholder meetings; andprotections for different groups of shareholders.

Clearly drafted articles help everyone understand how the company should be managed and how important corporate decisions will be made.

When should articles be reviewed or amended?

A company’s articles should be reviewed whenever its ownership, share structure or governance arrangements change.

This may be appropriate when:

• establishing a company with more than one shareholder;
• putting a shareholders’ agreement in place;
• bringing a new shareholder or investor into the business;
• creating a new class of shares;
• issuing employee or investor shares;
• changing voting or dividend rights;
• introducing restrictions on share transfers;
• planning for succession or the departure of a shareholder;
• restructuring the company; or
• reviewing older or outdated constitutional documents.

Articles adopted when the company was first formed may no longer reflect how the business operates. Reviewing them before a significant transaction or change can identify gaps and inconsistencies at an early stage.

Our advice is practical and tailored to your company’s ownership, management arrangements and future plans. We aim to provide clear articles that protect the company and its shareholders while allowing the business to operate effectively and grow.