Articles of Association for a Private Company Limited by Shares (LTD)

What is an articles of association?

A company's articles of association refers to the internal rules that govern the way the company will be run. The articles of association sets out how the company's directors will take decisions and exercise their powers. The articles of association also set out how the shareholders will exercise their powers to take certain decisions (e.g. appointing directors, transferring shares).

 

What are the different types of articles of association?

An private limited company has three options on the type of articles of association to adopt. These are:

• Unamended model articles: These are the default articles available to a company contained in the statute. These are a set of minimum basic rules, usually more friendly for small business as it keeps regulation to a minimum. When adopted, the company must adhere to all the rules contained in the unamended model articles.
• Amended model articles: For this type of articles of association, the company will create a copy of the changes it wishes to make to the unamended model articles and attach it to them. These changes will be called the "special articles". In order words, for amended model articles, only the amendments and/or entirely new articles need to be written down. The rest of the unamended model articles will be left unchanged.
• Bespoke articles: As the name suggests, these type of articles are a set of tailor-made articles with no reference to the model articles. They will be drafted to suit the specific requirements of the particular company's shareholders as they are in essence custom-made.

 

What is the difference between articles of association and a shareholders agreement?

A shareholders' agreement is an agreement between the shareholders of the company which sets out their rights, responsibilities and other matters not covered by the articles of association. The shareholders' agreement is permits the clauses to be more specific or tailored to the shareholders' interests.

The articles of association is a not a contract between the shareholders, but a public document that outlines the company's internal rules governing the running of the company. Whereas, the shareholders' agreement is private to the shareholders, the articles of association can be accessed by the public as it has to be filed with the Companies House.

 

Is it mandatory to have articles of association?

Yes, it is mandatory for a company within the UK to have articles of association. The articles of association have to be made publicly available by filing with the Companies House.

 

What type of company is involved in this type of articles of association?

This type of articles of association is specifically to be used for a private limited company.

 

What has to be done once articles of association is complete?

• For a newly formed company: the articles of association should be included during the company registration process as the newly formed company's articles. The articles can only be used if the company is being registered by post through form IN01 (unamended model articles).
• For an already established company: the articles of association can be adopted by the company acting through its shareholders or directors. To do so, the company will need to adopt the articles by special resolution, requiring a vote of 75% of members, or written resolution, requiring signed approval by each member. After adoption, the new articles should be sent to Companies House, together with the special resolution or written resolution that approved their adoption, within 15 days from the date of adoption.

Is it necessary to register the articles of association?

Yes, it is necessary to register the articles of association with the registrar at the Companies House. If the company is a newly registered company, the articles of association should be submitted to the Registrar at the same time when the company's incorporation document and memorandum of association are submitted (i.e. at the point when the company is being registered).

If the company has already been formed, the articles of association should be filed and sent to the Registrar of Companies within 15 days.

 

What are the costs involved in finalisation of articles of association?

The costs of finalising articles of association are also the costs associated with registration of the company where the company is a newly formed company. This is because the articles of association should also be submitted at the time of registering the company. The costs of registration can be found on the companies house website.

There is are no costs involved for the amendment of the articles of association.

What must articles of association contain?

The articles of association should contain the following provisions:

• Details of the company;
• Share capital of the company;
• Rights of shareholders;
• Duties and Powers of Directors
• Decison-making process;
• Appointment and Removal of Directors; and
• Amendment of Articles.

 

Which laws are applicable to articles of association?

Companies Act 2006

 

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