The articles of association is the primary constitutional document that sets out the rules and regulations by which the internal affairs of a company is governed. As stated in Section 18 of the Companies Act 2006, it is a legal requirement of all UK companies to have articles of association.
What do the articles of association do?
The articles of association (sometimes referred to as ‘the constitution’, or simply ‘the articles’) spell out the internal rules on how a company is to be run. It covers a range of topics including:
- What rights members (shareholders or guarantors) of the company are entitled to.
- What powers the directors enjoy.
- A number of procedural matters, such as how to increase the number of shares in a company, or the method through which dividends are to be made.
Given the vital information they hold, it is important that all directors, secretaries, and members of a company familiarise themselves with its content. The articles should therefore be easily accessible, and a copy should also be kept with the company’s records.
A company’s articles of association can also usually be viewed in their incorporation documents on Companies House Service. If they aren’t available to view there, that means the company is using the ‘Model Articles’. We look at what the Model Articles are in the next section.
What are the model articles of association?
The Model Articles are a template set of articles of association that companies can use. They act as the ‘default’ option of articles of association and are automatically provided to companies that do not submit their own set on incorporation.
Although limited in scope, the Model Articles provide a good base, particularly for small and one-person companies, and they can also be edited as a company sees fit. Most company formation agents include the Model Articles with their incorporation packages.
The Companies Act 2006, which provides the Model Articles, has three different versions, each for a different type of company: private companies limited by shares, private companies limited by guarantee, and public companies limited by shares. You can download and view the different versions on the Gov.UK website.
Do I need a memorandum of association?
A memorandum of association is also legally required for all UK companies and is a matter of public record. The memorandum lists the initial subscribers (first members) of a company; it certifies that those subscribers agree to form a company under the Companies Act 2006 and each agree to become a member of the company.
In the case of companies formed with share capital, the memorandum will also certify that each of the subscribers agree to take at least one share in the company. It is worth mentioning that the memorandum is a historical document, which means it cannot be changed.
Can I change my articles of association?
Changes can be made to the articles, provided a special resolution is passed in favour of the proposed amendments by the members of the company. A majority of 75% or more is required to pass a special resolution.