What are the Articles Of Association?
Published on June 21, 2021
An Overview of Articles of Association

Articles of Association include the standard provisions which determine how a business is operated. Being a component of a limited firm’s constitution, the document defines the internal guidelines that are required to be followed by the directors and partners of a company.

Irrespective of whether a company is a public or private corporation, as long as it is formed in the UK, it must have model articles of association during its incorporation.

Offered by Companies House and regulated by The Companies (Model Articles) Regulations 2008, there are currently 3 separate versions of the ‘association articles’ for 3 different structures of limited firms in the United Kingdom:

  • Private firms limited by guarantee
  • Private companies limited by stocks/shares
  • PLC also recognised as public limited companies

Articles of association are applicable to each company in the UK upon incorporation, except where the company elects to favour bespoke or modified articles instead. The model articles of association offer a perfect foundation for small agencies that have reduced risks of disagreements between company directors and shareholders. Nonetheless, some of the provisions within the articles of association can be modified, or you may also create a fresh set of articles, once the company has been established to fulfil the changing requirements of the company.

The Provisions Included In The Articles Of Association

They include 5 significant areas (whenever applicable):

Member liability – Economic liability of guarantors/shareholders is restricted to the specific value of the guarantees/shares they own.

Company Directors – Decision-making processes, roles and responsibilities, termination and appointment procedures, expenses, and remuneration.

Distribution of shares – Rights associated with shares, transfers/allotment of shares, dividend payment, payment for shares, along with other distributions.

Decision-making – Holding general meetings, other options related to decision-making, and voting at general company gatherings.

Administrative positioning – Allotted company communication documents, evaluating company records, company seal, insurance, and indemnity of company directors.

Can Model Articles Be Used If I Have A Company With A Single Shareholder/Company Director?

Limited companies that are in the private sector can be established with a single company director who will also be the only shareholder. In this case, the model articles may be utilised by a firm with a single shareholder or director, despite the ambiguity of articles of association that mentions otherwise.

It would be impossible to have at least 2 company directors at a meeting if you only have a single shareholder or director. In order to understand the provision that asks you to have at least 2 directors in its true sense, you must read it along with Article 7(2), which states:

In case, the company has a single shareholder/director, the standard rule can be disregarded, and the company director will be able to take decisions ignoring any provisions associated with the decision-making of the company directors.

The provision can thus be considered to only be applicable to firms with at least 2 directors.

Nonetheless, the articles of association might not be worth considering when:

  • Issuing a number of share classes or shares classes besides ordinary.
  • Offering an alternative to allot shares as half paid, unpaid, or entirely paid.
  • In the case of alternate company directors.
  • Limiting the powers of company directors.
  • Approving additional duties and roles to directors.
  • Including limitations on share transactions.
  • There is a need for limited firms to hold business gatherings.
  • Holding meetings or giving notifications through electronic means.
  • Eliminating provisions which may prevent company directors from voting in case conflicting interests arise.
  • Modifying the articles of association.

With the passing of each year, companies are likely to evolve. This makes it essential for companies to limit or add certain provisions in model articles, reword specific provisions, or come up with completely new model articles that might better suit the company’s needs in the future.

As long as the modifications made to model articles take into account company law, partners can easily change them by passing a resolution on paper or during a company meeting. Such decisions need a majority voting percentage of no less than 75 percent of shareholder votes.

A company wanting to change its model articles must provide a separate copy of fresh articles along with the resolution to Companies House within 15 days of the modifications being agreed.

If a company wants to revert back to articles of association, it does not need to send another copy to the registrar. Nonetheless, it must inform Companies House about the changes along with the resolution copy.

In the event any provisions within the articles conflict with the 2006 Act, the articles of association can override those provisions. Likewise, if bespoke or modified articles don’t mention certain scenarios, an original model article application must be applied to cover these scenarios.

Getting Model Articles For Your Company

Often, model articles will be sent to you via post or email after the incorporation of your company, using your chosen communication method.

You can only request model articles from Companies House. Therefore, if you are considering using bespoke or modified articles then you are expected to provide them independently. Also, the only means to register your company with articles of association is via the online service offered by Companies House. Alternative incorporations need to be sent by post. This may prove more expensive and take a minimum of 10 days to process.

All the applications associated with company formations are seen by Companies House and mostly take 4 to 6 business hours to process. Once processed, you’ll get a soft copy of the selected model articles via email, in addition to the incorporation certificate and other documents related to company formation.

What Is A Confirmation Statement And How Do I File One?

What Is A Confirmation Statement And How Do I File One?

You can use the internet or postal service to file a confirmation statement for your company.

Nonetheless, the online method is much simpler, faster, and secure compared to the post. Besides, it only costs you £13.00, compared to the cost of around £40 when sending it by post of around £40.00. Using the post also takes far longer.

Everything You Need To Know About The UK VAT Threshold

Everything You Need To Know About The UK VAT Threshold

It is important for a business to register for VAT provided that during the previous year their ‘taxable supplies’ (typically based on the turnover and not the profits) have surpassed the threshold for VAT. This is applicable to all businesses in the United Kingdom, no matter whether you’re working as a limited partnership, company, or sole trader.

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