Articles of association

The Articles of association (also known as ‘articles of incorporation’ or simply ‘articles’) set out the rules according to which a company must be run and administered. They regulate a variety of matters such as:

• appointment of company directors

• issuing of new shares

• circumstances allowing the forced sale of shares

• procedures relating to board meetings and shareholder decisions

The articles of association form a contract of membership between the company and its shareholders. 

While directors are not a party to the articles (and, therefore, will not be in breach of contract for breaching the articles), they are subject to their own directors’ duties and directors’ service agreements (or Senior employment contracts).

Most new companies will adopt the model articles provided by Companies House. These cover:

• directors' powers and responsibilities

• decision-making procedures of directors (eg how decisions should be taken, the quorum for and chairing of directors meetings and how to deal with conflicts of interest)

• appointment of directors (including termination, remuneration and expenses)

• shares and distributions (eg issuing and transferring shares, payment of dividends and authority to capitalise profits)

• decision making by shareholders (eg quorum for and chairing of general meetings, voting matters and amendments to resolutions)

• administrative arrangements (including means of communication to be used, company seals and directors' insurance and indemnity)

Some companies may decide to alter these model articles to suit their particular organisation, as long as the changes comply with the Companies Act 2006. In this case, the company cannot be incorporated online. Instead, the customised articles must be sent to Companies House.

If a Shareholders' agreement is in place, it may be necessary to customise the articles of association to ensure both documents align.

You will need a memorandum of association to set up a private limited company in the UK. The memorandum cannot be changed once the company is incorporated and complements the articles. The memorandum defines the company itself, including elements such as:

• company name and date of incorporation

• whether the company is limited by shares or by guarantee

• names and signatures of all subscribers (ie initial shareholders)

A memorandum of association is the other document that is required to set up a limited company in the UK. This cannot be changed once the company is incorporated. This complements the Articles of Association and defines the company itself, including elements such as:

• company name and date of incorporation
• whether the company is limited by shares or by guarantee
• names and signatures of all subscribers

A template memorandum of association can be downloaded from Companies House.

Another document that may be used when forming a limited company is a Shareholders' agreement. This defines the roles, rights and obligations of company shareholders. Unlike the articles of association and memorandum of association, a shareholders agreement is a private document.

When registering a company (and whenever new shareholders join), you must also issue Share certificates to all shareholders. This must be done within two months of a company's formation or the date of a new share issue or transfer.

You may want (or need) to change your articles of association for various reasons, including:

• to change the way in which your company is administered

• to change your company objects (this is only relevant for companies registered before October 2009)

• to take account of a change in the law

• because you have been ordered to do so by the courts or a regulating authority

To update a company’s articles, the directors need to hold a board meeting. At this board meeting, they must resolve to convene a general meeting and approve a circular to send to the shareholders saying that the articles need to be amended.

A general meeting then needs to be held with the shareholders where they need to pass a special resolution. This requires at least 75% of the vote share to agree to the proposed changes. Make sure to check your articles of association as they may set out different requirements for a special resolution (eg 95% of shareholders to vote in agreement with the proposed change).

Once updated, the new articles must be sent to Companies House within 15 days, along with proof of the special resolution and any required forms.

A copy of the articles of association should be kept at the company's registered office - or a single alternative inspection (SAIL) address. A SAIL address is a different address at which the articles are available for public inspection (eg a company’s office, where this is different from its registered address).

The articles will also be held by Companies House where they are accessible as a public record.