Are you setting up a company? And wondering what the articles of association are? They are legal documents that set out how a company will be managed and governed. These documents dictate how directors manage the company and how decisions are finalised.
This blog explains the articles of association, how they work, and why they matter to businesses in the UK under the Companies Act 2006.
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What are Articles Of Association?
If you are starting a new business in the UK or auditing your existing business, you need to understand the concept of articles of association to ensure compliance. They form a legally binding contract between a company and its members.
Additionally, they outline the business’s administrative regulations, mainly focusing on internal management. The articles may also set out rules about what voting rights shareholders will have, and how dividends and shares will be issued.
Without properly drafted articles, companies may face governance disputes or operational confusion.
These articles cover:
- Limited liability of members
- The rights of shareholders/ guarantors
- How decisions are made
- The responsibilities and powers of company directors
- Process for hiring and removing company officers
- The procedure to issue and share company shares
- The process for approval and issuance of dividends
- Requirements for board meetings and general meetings
All the company officers and members must be well aware of these articles, and the business must keep a copy of these articles. You can view the articles of association online on. If they’re not found, it means you’re using a model article of association.
What is in an Article of Association?
Key components of the company’s articles include director powers, share transfer, shareholder voting rights, and decision-making processes for meetings.
Director’s Duties and Power
The articles of association specify how directors are appointed and removed. They also outline the director’s authority and responsibilities.
Shareholder Rights
Shareholders’ voting rights, details on dividends, and the procedure for transferring or issuing new shares are included.
Decision-Making Procedures
The articles also include rules for board meetings, quorums, voting thresholds, and shareholders’ general meetings.
Company Management
Rules governing the use of the company seal, directors’ reimbursement, and financial records.
Who Needs Articles of Association?
In the UK, every incorporated company registered at Companies House must have articles of association. Under the UK Companies Act 2006, businesses cannot complete the incorporation process without them.
Additionally, your business needs this document as it serves as the company’s constitution, explaining internal governance rules for shareholders and directors. They are also essential for private limited companies, public limited companies, community interest companies, and non-profit companies.
What is the Difference Between the Memorandum of Association and the Articles?
A memorandum of association is a legal statement that creates the company. It is signed by all initial shareholders or guarantors agreeing to form a company. Also, it is a record of the company at the exact moment of birth. The memorandum doesn’t change or update.
On the other hand, articles of association are a set of rules that govern how a company is run. They change as the business grows.
What are the Model Articles of Association
When setting up a company, a business can use model articles of association. They are a standard set of internal governance rules prescribed under the Companies Act 2006.
This set of rules is designed to give small businesses an instant, legally compliant framework from the beginning without paying for expensive legal drafting. Different latest model articles apply to:
- Private companies limited by guarantee
- Private companies limited shares
- Public companies
Can the Articles of Association be Changed?
Yes, the articles of association can be changed whenever you want after the company is incorporated with the Companies House.
However, if a company wants to amend its articles, it should call a meeting where the directors need to review and formally propose the changes. It must pass a special resolution to approve the changes, and 75% of the voting rights must approve the changes.
You must send the special resolution and a copy of the amended articles to Companies House. For internal administrative transparency, it is important to keep a copy of the new Articles at your registered office.
Where Can I Find My Company’s Articles of Association?
You can find your company’s Articles online through the official Companies House Service. Since articles of association are a public document, they are kept on the official government register.
To locate your document, you first have to go to the official Companies House page. Enter your company name and company registration number.
Open the company profile and look for the “filing history” tab. Scroll and look for the document at the very bottom of the history list. If your company is recently incorporated, look for a filing labelled “incorporation.”
You can also keep a copy of the articles at your registered office address. This will make it easier for you to find them.
Can You Write Your Own Articles of Association?
Yes, you are legally allowed to create your own articles of association instead of using the model articles provided by the UK government.
Most companies usually adopt model articles during incorporation, but some prefer writing their own articles of association. When you draft a custom set of rules, it is called bespoke articles. They are necessary because they protect shareholder interests, provide essential clarity, and prevent costly operational disputes.
However, if you choose to create your own articles, they must meet legal and administrative standards set by Companies House.
Ensure Compliance
Your drafted articles cannot go against the UK statutory law. Your document must ensure compliance with the Companies Act 2006. For instance, you cannot write an article that says a company can bypass corporate tax obligations.
Formatted Paragraphs
Your document must be structured into numbered paragraphs and clauses. It should cover the director’s power, general meeting rules, shareholder voting rights, and share allocations.
Electronic Filing
Don’t leave the articles blank during incorporation. When incorporating a company, bespoke articles can be submitted alongside Form IN01 during the registration process.
What are the Legal Effects of the Articles of Association?
As mentioned above, the articles set out the company’s rules for how it is managed, shareholders’ rights, directors’ power, share transfer, and voting procedure. The document binds the company and its members, creating specific legal consequences.
If a company breaches the articles, its members can take legal action. However, the articles do not create rights for members outside of the company.
Speak to an Expert
Get in touch with our skilled professionals for expert UK tax and accounting solutions specialised to minimise your tax burden and resolve your financial challenges efficiently.
The Bottom Line
A company’s Articles of Association are the fundamental rules governing its operations. Typically drafted by the founders with legal assistance at the company’s inception, these documents specify share issuance, voting rights, directors’ duties, company management and the amendment process for the articles.
Also, they act as the legal backbone of your enterprise, defining managerial boundaries and protecting investor rights. If you are setting up a basic company, you can use the default UK Model Articles. However, growing enterprises often require tailored clauses to protect their unique interests.
If you want to set up a company and are struggling to understand the legal obligations, we have a platform that connects you to professionals in no time. At AccountingFirms, we can match you with a UK accountant who can handle your business operations as needed.
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.
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