What are articles of association?
A company’s articles of association (“Articles”) set out provisions relating to a company’s constitution (for example the rights attaching to a company’s share capital and rules relating to meetings). The Articles are a public document and are available for inspection at Companies House.
Should you change your company’s articles?
Articles are often neglected and a company’s circumstances can change without them being updated. Then, when an important question arises in relation to the company’s constitution, for example, whether someone’s shares can be transferred to a third party, the Articles may not be suitable or reflect the intentions of the key shareholders. Many companies have “standard” Articles which are based on “Table A” or the new model articles of association for private companies (known as the “Model Articles”) made under the Companies Act 2006.
Companies incorporated prior to the enactment of the Companies Act 2006 (the “Act”) have Table A articles contained in the Companies Act 1985 or bespoke articles which would have been drafted based on the 1985 Act. The Table A regulations have now been replaced by the “Model Articles”. However, despite the final provisions of the Act coming into force on 1 October 2009, many private companies have not updated their Articles to take advantage of the following:-
- The notice period for general meetings is now 14 clear days, even if a special resolution (previously requiring 21 days’ notice) is proposed. Further, the consent requirements for holding meetings on short notice have been relaxed.
- The 2006 Act allows written ordinary resolutions to be passed by a simple majority (51%) of those eligible to vote and written special resolutions by a 75% majority, rather than unanimity as previously required under the 1985 Act. Passing a written resolution is a lot easier than holding a meeting.
- Private companies are no longer required to hold annual general meetings.
- The requirement to have an authorised share capital has been abolished. Companies incorporated since 1 October 2009 have no restriction on the number of shares it can issue, unless a limit is set in the company’s Articles. Companies registered before that date will still be subject to the authorised capital figure in their Articles until they are amended. This needs to be considered if it is proposed to issue new shares.
- Private companies are no longer required to appoint a company secretary (although other officers would be required to perform company secretarial duties in that case).
- The Act allows a company to communicate with its shareholders and others by e-mail or via a
website which will be of benefit to companies with a number of shareholders.
- The provisions under which a director may be indemnified by his or her company against any liability which he or she may incur in the course of his or her duties has been amended.
- Directors are authorised to change the name of the company rather than requiring a special resolution of the shareholders.
If you would like to discuss amending your company’s Articles with someone in our corporate department or would just like some further information, please contact our corporate partner, James Orpin on 01392 201891 or email him at email@example.com