How to change your company’s articles of association

Your company’s articles of association are its rulebook – they govern how it’s run, how decisions are made, and what rights your shareholders and directors have. But businesses evolve, and what worked when you first incorporated may no longer reflect how your company operates today.

The good news is that changing your articles of association is straightforward. You’ll need at least 75% of your members (shareholders or guarantors) to agree to the change by passing a special resolution, and you must notify Companies House within 15 days. If you’re the sole director and shareholder, you can make the changes yourself.

This guide explains both routes to passing a special resolution – written resolution or general meeting – and helps you decide which is right for your situation.

 

Can I change my company’s articles of association?

Yes, you can change your company’s articles of association at any time. To make changes, you’ll need 75% of your company’s members’ votes to pass a resolution to adopt the new articles of association.

How to amend your articles: 2 legal routes

If you want to change your articles of association, your company’s members must pass a special resolution, either in writing or at a general meeting. Your members are your shareholders if your company is limited by shares, or your guarantors if your company is limited by guarantee. A special resolution requires 75% or more of the votes in favour to pass, compared to an ordinary resolution, which only requires more than 50% of the votes in favour.

There are two routes you can take to pass a special resolution to amend your articles of association – by written resolution or at a general meeting.

Option 1 – By written resolution

The quickest and easiest way to change your articles of association is often by passing your special resolution as a written resolution, rather than at a meeting. In other words, the resolution is passed in writing rather than at a meeting.

You may choose this option if you don’t want to arrange and attend a general meeting, which isn’t always convenient or practical.

Follow these general steps to make changes to your articles of association by written resolution:

• Draft the special resolution, noting that you plan to replace your existing articles of association, and include a copy of your new articles of association. You should also include a statement explaining to members how to show their agreement with the resolution and the deadline for doing so.
• Send the special resolution and statement as a hard copy or in an electronic format to every member of your company who’s eligible to vote. You can send individual copies to everyone at once or circulate the same copy to each member in turn.
• Send Companies House the following documents within 15 days of the resolution being approved:
  • A copy of the special resolution with either all the signatures of those who agreed to it, or the signature of one director confirming that the resolution has been passed by the required majority
  • A copy of your new articles of association

Option 2 – At a general meeting

You can also pass a special resolution during a general meeting of your company’s members. This could be a planned annual general meeting (AGM) or a general meeting called specifically to propose the resolution.

You may prefer this option if your company has many shareholders or if the proposed changes to your articles of association require detailed discussion.

You should follow these general steps to pass a special resolution at a general meeting:

• Hold a board meeting to discuss and prepare the special resolution.
• Agree at the board meeting to call a general meeting of your company’s members.
• Send notice of the general meeting to all eligible members at least 14 clear days in advance of the meeting date. You must provide details of the proposed resolution, including an overview of the changes and a copy of the proposed new articles.
• Present the resolution to your company’s members at the meeting, allowing them to discuss the proposed changes and cast their votes.
• Send Companies House a copy of the approved special resolution signed by one director confirming it’s been passed, and a copy of your new articles of association, within 15 days of the resolution being approved.

How to amend articles of association: summary

• Draft new articles of association, including your changes
• Draft a special resolution to adopt the new articles of association
• Send a written special resolution and the new articles of association to all members and tell them how to agree and by when, OR call a general meeting to discuss the changes and approve the special resolution
• Send the approved special resolution and a copy of your new articles of association to Companies House within 15 days

When do my new articles of association take effect?

Your new articles of association will take effect as soon as the special resolution has passed. You should keep a copy of both the special resolution and your new articles of association at your registered office address.

Companies House will also publish the documents you send to it on the public central register of companies.

Who needs to be informed after changes?

You must give a copy of your articles of association to your directors, members, and company auditor, where applicable.

Model Articles: Sole director issues and how to solve them

Amending the articles of association for a charitable limited company

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Filing your changes with Companies House

You must notify Companies House within 15 days of making any changes to your articles of association. To do so, you must send a copy of the special resolution that was passed and the new articles of association to Companies House.

Depending on the circumstances, you may also need to send one of the following forms to Companies House within 15 days of changing your articles of association:

• Form CC04 – if you’re updating your company’s objects (its purpose or goals) as part of the changes to your articles of association
• Form CC05 – when a change in the law forces you to alter your articles of association
• Form CC06 – if the court or another authority has ordered the change

You can submit your documents using the Companies House document upload service, or by sending paper copies by post to Companies House.

Why would you change your articles of association?

Your articles of association regulate every aspect of your company’s internal administration, so they need to be fit for purpose.

Over time, you might need to update your articles of association for the following reasons:

• To support the changing structure of your business
• To allow you to change your company’s objectives
• To meet the needs of your business

For example, you might need to make one or more of the following changes:

• Reword one or more of the existing provisions – if your company issues shares to additional shareholders, you might want to reword your shareholder rights provisions to ensure existing shareholders retain a more comprehensive right of first refusal over those shares.
• Add, remove, or replace certain clauses – if you appoint a new board of directors, you might want to add a clause requiring regular board meetings to promote good governance.
• Create entirely new or bespoke articles of association – if you decide you want to run your company in a very specific way, you may need to create tailored articles of association to set out the exact rules for running your company.

Common reasons for updating your articles of association

There are common situations that might require you to change, amend, or update your articles of association. Generally, they’ll concern either your shareholders or your directors.

Shareholder-related changes to the articles of association

There are five common shareholder-related reasons to change your articles of association, which we discuss here.

Shareholders’ rights

You might find you need to clarify, enhance, or adjust your shareholders’ rights – perhaps the most crucial reason to change your articles of association.

Important provisions that you may wish to consider include:

• Pre-emption rights
• Drag-along and tag-along rights
• Transmission of shares (i.e. automatic transfer) in specified situations, such as the death of a shareholder
• Voting and dividend rights attached to shares
• Policy for declaring and distributing dividends
• Decision-making rules and procedures, including reserved matters
• Restrictions on share allotments and share transfers
• Share buyback clause
• Restrictive covenants

Ideally, you should also cover any issues related to your shareholders in a shareholders’ agreement. A shareholders’ agreement is optional and supplementary to your articles of association, but they shouldn’t contradict each other. Therefore, if you change your company’s articles of association, you may need to review your shareholders’ agreement.

Membership criteria

You can control who holds shares in your company. For example, you might want to impose a minimum age requirement for shareholders or limit the number of shareholders in your company. You might stipulate that only family members or individuals with specific experience, affiliations, or objectives can be shareholders in your company.

Issuing different share classes

The standard articles of association prescribed by the Companies Act 2006, known as ‘model articles’, are generally only suitable for companies with a single class of ordinary shares. If you want to issue multiple share classes, you’ll normally need to change your company’s articles of association accordingly.

Authorised share capital

You might decide to limit the number of shares your company can issue to a fixed amount (e.g. £100 divided into 100 shares with a nominal value of £1 per share). Imposing this kind of restriction is known as ‘authorised share capital’.

You might choose to specify a maximum amount of share capital in your articles of association to prevent your existing shares from losing too much value.

Dispute resolution

The standard articles of association, or model articles, don’t cover shareholder disputes. However, it’s relatively common for shareholders to disagree. You should, therefore, include a clear dispute resolution procedure in your articles of association to ensure any potential conflicts can be dealt with quickly and effectively.

Director-related changes to the articles of association

Here, we discuss three reasons to change your articles of association that relate to your company’s directors.

Appointment of directors

There are very few legal restrictions on who can be appointed as a director of your company.

You may consider stipulating the following in your articles of association:

• Whether existing directors have the power to appoint new directors without shareholder approval
• Whether directorship is restricted to members or to people with certain qualifications
• Whether there’s a limit on the number of directors the company can have at any one time

Directors’ powers

The standard articles of association, or model articles, give your directors a lot of power and control over the day-to-day running of your business. Unless every shareholder is also a director of your company, they have very little say over routine management decisions and the direction of your company.

For this reason, you might consider amending your articles of association to limit your directors’ powers and stipulate that certain decisions can’t be made without your shareholders’ consent – for example, issuing new shares or approving share transfers.

Company meetings

You’re not legally required to hold board meetings or general meetings if you run a private limited company. However, doing so can be very valuable. As such, you might want to change your company’s articles of association to state that meetings must be held at regular intervals – for example, at the end of every quarter, or at the end of the financial year.

Legal or regulatory changes requiring updates

You may have to change your articles of association to comply with new laws or amendments to existing laws. The court or a regulatory body (e.g. the Charity Commission) might also order you to make certain changes to your articles of association.

Legal restrictions on amending your articles of association

You should be aware of the following rules and restrictions when changing your articles of association:

• Any changes you make must comply with the Companies Act 2006.
• Any changes you make must be in the best interests of the company as a whole. This protects the rights of all your company members, particularly your minority shareholders.
• No member is bound by any alteration introduced after the date on which they became a member, if the alteration requires them to take more shares than they already have at that time, or if it increases their liability to contribute additional capital to the company. However, neither restriction applies if the member agrees in writing to be bound by the alteration.
• You can’t introduce a provision that prohibits members from making any future changes. However, it is possible to attach conditions to future changes to your articles of association (e.g. that certain decisions require unanimous approval of members).

Keep your articles up to date

Your company’s directors and members should review your articles of association regularly to ensure they’re fit for purpose. Unsuitable or outdated articles of association can create avoidable obstacles, problematic decision-making, and shareholder disputes, all of which could be detrimental to the company’s success.

Do I need a solicitor for this process?

You may wish to consult a solicitor when making changes to your articles of association. You’re not legally required to do so, but it could be worthwhile to ensure this key governing document is lawful and fit for purpose.

If, for example, you decide to draft entirely new bespoke articles of association for your company without referring to the model articles, you should seek legal advice to make sure your new articles of association are compliant.

A company formation agent may also be able to help. For example, 1st Formations offers a company secretarial service.