What are Model Articles of Association?

If you are in the process of establishing a new company then one of the founding documents that you must consider is the articles of association. Using model articles of association can make the process of drafting these articles far easier, since they contain the essential elements of this key constitutional document. In this guide we explain what is meant by “model articles of association”, the limitations of their use and the alternatives available.

What are model articles of association?

As we have outlined before, elsewhere, a company’s articles of association are a mandatory constitutional document that is created and put in place when registering a new company. It constitutes an agreement about how the company will be run by its shareholders, directors and company secretary and includes details such as:

  • How directors will be appointed and removed.
  • How new company shares will be issued.
  • How shares will be transferred.
  • How directors will make decisions.
  • How meetings for directors and shareholders will be organised and run, run and the process for voting.

Model articles of association are standard templates of articles of association provided by Companies House and can be used as they are or adapted to meet the needs of the new company.

As defined in section 19 of the Companies Act 2006 (CA 2006), the Secretary of State has the power to prescribe model articles of association for different descriptions of a company:

Power of Secretary of State to prescribe model articles

  1. The Secretary of State may by regulations prescribe model articles of association for companies.
  2. Different model articles may be prescribed for different descriptions of company.
  3. A company may adopt all or any of the provisions of model articles”.

It is important to emphasise that the use of model articles is not compulsory.

The Companies (Model Articles) Regulations 2008 provides for three different types of model articles of association:

  • Model articles for private companies limited by shares.
  • Model articles for private companies limited by guarantee.
  • Model articles for public companies.

The focus of this guide is on the model articles for private companies limited by shares.

Model articles of association are typically geared towards smaller, owner-managed companies and are intended to be as straightforward and generic as possible. Those drafting the Articles of Association are free either to leave the model versions completely unaltered or to amend them as necessary to accommodate the needs of the company.

Model articles of association are available from Companies House on the UK government website.

Alternatives to the model articles of association provided by Companies House

Some company formation specialists such as Uniwide Formations have developed their own set of standard articles which can be used for a wider range of private companies limited by shares. As these have been carefully drafted based on considerable experience of working with owners, directors and officers of companies across a very wide range of sectors, these can easily be tailored to meet the needs of modern companies.

Default application of Model Articles

If articles of association are not registered by a company then the relevant model articles of association apply by default. This is defined in section 18 of the Companies Act 2006, as follows:

  1. A company must have articles of association prescribing regulations for the company.
  2. Unless it is a company to which model articles apply by virtue of section 20 (default application of model articles in case of limited company), it must register articles of association”.

Section 20 of the Companies Act 2006 states:

    On the formation of a limited company—
    (a) if articles are not registered”
    i.e. if no articles have been registered then model articles shall automatically be deemed to apply.

What is included in model articles of association?

The Companies House model articles of association for private companies limited by shares includes 53 sections covering many important considerations. These include:

    Part 1

    Interpretation and limitation of liability
  1. Defined terms
  2. Liability of members
  3. Part 2

    Directors’ powers and responsibilities
  4. Directors’ general authority
  5. Shareholders’ reserve power
  6. Directors may delegate
  7. Committees

  8. Decision-making by directors
  9. Directors to take decisions collectively
  10. Unanimous decisions
  11. Calling a directors’ meeting
  12. Participation in directors’ meetings
  13. Quorum for directors’ meetings
  14. Chairing of directors’ meetings
  15. Casting vote
  16. Conflicts of interest
  17. Records of decisions to be kept
  18. Directors’ discretion to make further rules

  19. Appointment of directors
  20. Methods of appointing directors
  21. Termination of director’s appointment
  22. Directors’ remuneration
  23. Directors’ expenses
  24. Part 3

    Shares and distributions
  25. All shares to be fully paid up
  26. Powers to issue different classes of share
  27. Company not bound by less than absolute interests
  28. Share certificates
  29. Replacement share certificates
  30. Share transfers
  31. Transmission of shares
  32. Exercise of transmittees’ rights
  33. Transmittees bound by prior notices

  34. Dividends and other distributions
  35. Procedure for declaring dividends
  36. Payment of dividends and other distributions
  37. No interest on distributions
  38. Unclaimed distributions
  39. Non-cash distributions
  40. Waiver of distributions

  41. Capitalisation of profits
  42. Authority to capitalise and appropriation of capitalised sums
  43. Part 4

    Decision-making by shareholders
    Organisation of general meetings
  44. Attendance and speaking at general meetings
  45. Quorum for general meetings
  46. Chairing general meetings
  47. Attendance and speaking by directors and non-shareholders
  48. Adjournment

  49. Voting at general meetings
  50. Voting: general
  51. Errors and disputes
  52. Poll votes
  53. Content of proxy notices
  54. Delivery of proxy notices
  55. Amendments to resolutions
  56. Part 5

    Administrative arrangements
  57. Means of communication to be used
  58. Company seals
  59. No right to inspect accounts and other records
  60. Provision for employees on cessation of business

  61. Directors’ indemnity and insurance
  62. Indemnity
  63. Insurance

What are the limitations of model articles of association for private companies limited by shares?

The Companies House model articles of association for private companies limited by shares contains a number of limitations and assumptions of which it is important to be aware, as follows:

  • the company has one class of shares.
  • the model articles of association do not contain any authority for the directors to issue up to a specified amount of shares.
  • directors have an absolute discretion to refuse to register a transfer of shares.
  • all of the company’s shares are issued fully paid.
  • the company has a secretary.
  • the company’s shareholders do not have the right under section 145, CA 2006 to nominate another person to enjoy some or all of that shareholder’s rights.
  • the company does not have any subsidiaries and is not part of a wider group of companies.
  • the company has a common seal.

Given the assumptions and limitations of the model articles of association, it is important to review each section to verify whether amendments are needed in order to meet the requirements of your company. Furthermore, if your company makes key changes after formation (e.g. if you nominate a company secretary) then approval for these changes must be gained by written resolution or at a shareholders’ meeting and then the articles of association must be updated to reflect this alteration to your company’s constitution.

It may be, however, that using model articles of association is not appropriate for your particular needs. If the model articles meet most of your then you may decide simply to remove certain sections, such as the right of the chairman to have a casting vote or the right of directors to vote if they have a conflict of interest.

The importance of seeking expert help when drafting articles of association

While the standard articles of association provide a useful starting point and may be entirely suitable for some companies, having a set of articles of association drafted by an expert in company formation law may provide significant benefits, including putting in place the necessary provisions for:

  • Voting by directors – It is important to ensure that an effective process for director voting exists that reflects the structure of the company. This includes ensuring that a quorum of directors is available to vote on decisions and that the process does not pose impose an unnecessary burden upon directors.
  • Different classes of share – Many larger companies have more than one class of share with different voting rights attached.
  • Pre-emption rights on the allotment and transfer of shares – A specific provision may be required for pre-emption rights on the transfer of shares to ensure that directors have a say in who should receive shares first if a shareholder leaves.
  • Allotment of shares – You may wish to include an article that allows directors to issue shares to new shareholders following incorporation which are unpaid, partly paid or fully paid (instead of fully paid as specified in the standard articles).

Final words

Model articles of association provide a useful starting point when drafting constitutional documents, especially for small owner-operated businesses with a straightforward structure and decision-making process. At Uniwide Formations we have our own set of highly comprehensive Standard Articles of Association templates which can either be used as they are or else can be tailored to the needs of your company. Furthermore, we will ensure that any changes to your company following incorporation are quickly and accurately reflected in your existing articles, thereby ensuring that these articles are always up to date and properly registered.

Uniwide Formations specialises in the registration of limited companies and LLPs. As professional business service providers, we offer a wide range of related services and can advise you on all aspects of limited company formation and filing.

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