The Model Articles of Association 101
For business owners, staying abreast of important dates and documents is a basic requisite. So, if you’re starting a new company and you’re in the middle of finalising your business address and all other obligatory tasks, be sure to know your certificate of incorporation from your Model articles of association.
Model Articles of Association Defined
The Model articles of association were introduced on 1st October 2009 in place of “Table A” as the default group of articles for limited companies in the UK that were incorporated on or after this date.
The Model articles of association are a legal document that contain the standard default provisions regulating the running of a company and the way in which it is currently functioning. It is part of a private limited company’s constitution to have Model articles of association that outline the internal regulations that must be adhered to by the members and directors of a company.
Private and public companies that were formed in England and Wales, Scotland, and Northern Ireland are required, by law, to have Model articles of association during the incorporation date.
What Are the Different Types of Model Articles of Association?
Governed by the Companies Act 2006 and provided by Companies House under the “The Companies (Model Articles) Regulations 2008”, there are three versions of the Model articles of association that are present for the three different limited company structures in the UK:
- Private companies limited by shares
- Private companies limited by guarantee
- Public limited companies (PLC)
The Model articles of association automatically apply to all UK companies upon incorporation. However, the company can instead choose to utilise altered or bespoke articles where it’s possible to affix specific provisions in the Model articles of association, or form completely new articles at any point post-incorporation.
What Provisions Are Included in the Model Articles of Association?
The following provisions contained in the Model articles of association generally cover five essential areas (where applicable):
- Members’ Liability – Financial liability of shareholders or guarantors is limited to the fixed nominal value of their shares or guarantees
- Directors – The responsibilities and powers, decision making processes, appointment and termination, remuneration and fees/costs/expenses
- Shares and distributions – Payment of shares, rights attached to the shares, allotment and transfers of shares, dividend payments and other distributions
- Members’ decision making – General meeting organisation and voting, additional decision-making stipulations
- Administrative arrangements – Permitted forms of company communication, company seal, company records inspection, directors’ indemnity and insurance
You Can Use Model Articles of Association for a Company With One Company Director
Private limited companies may be formed with just one director who is also the sole shareholder. Therefore, the Model articles of association can be utilised by a company that has only one director and shareholder. This is despite the ambiguity of Model Article 11(2) which states:
“The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.”
Quite obviously, having a minimum of two directors present at a general meeting would be impossible in companies with only one director. To comprehend this provision, it should be read in conjunction with Article 7(2), which states:
- the company only has one director, and
- no provision of the articles requires it to have more than one director,
the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.”
The provision for a quorum of two directors for meetings is only applicable to companies with two or more directors.
When Are Model Articles of Association Unsuitable?
Although the conventional Model articles of association are adequate for new companies, they’re not necessarily a “one size fits all”. Some companies may find it more suitable to form bespoke articles before or after incorporation, when:
- Multiple share classes are being issued, or any class of share other than Ordinary shares
- There is provision to allot shares as unpaid, partly paid, or fully paid
- Alternate directors are present
- Directors’ powers are being restricted
- More powers to directors are being granted
- Restrictions on the transfer of company shares are included (transfer company shares)
- A private limited company to hold annual general meetings is being required
- Notices are given and meetings are held by electronic means
- Conflict provisions are being removed that stop the voting rights of directors if they have a conflict of interest
How to Change the Model Articles of Association
Since different companies have different needs that change over time, it’s important for companies to amend their Model articles of association by removing or adding provisions in time. e.g. alter the wording or form a completely new set of articles that more accurately suit a company’s needs at that point.
If any changes made to the Model articles of association adhere to company law, company members can agree to alter the Model articles of association by passing a special resolution in writing or a at a general meeting. However, a majority decision is required of at least 75% of shareholder votes.
If a company amends its Model articles of association, a copy of the new articles and the members’ resolution has to be sent to Companies House within 15 days of any change being agreed. If a company reverts to the original Model articles of association, a copy of the articles is not required to be sent, however Companies House must still be informed of the amendment and they must receive a copy of the resolution.
If any provisions in the articles fail to subscribe with the Companies Act 2006, the Model articles of association will trump those specific provisions. Notably, if changed or bespoke Model articles of association fail to address certain issues, then a default application of the Model articles of association will be applied to cover such issues.
From Where Do You Receive Model Articles of Association?
You will typically receive Model articles of association via email or through post after your company incorporation, depending on the method of the selected incorporation.
Companies House only provides Model articles of association, so you will have to provide your own articles if you wish to adopt modified or bespoke articles. Furthermore, you may only use the online incorporation service at Companies House to register a company with Model articles – any other incorporations have to be submitted by post, which is costlier and takes at least 8-10 days for processing to be completed.
Unless a company makes the decision to form their own articles of association, the Model articles of association from Companies House under the Companies Act 2006 are deemed the default articles. Any self-formed articles are a better option for companies with multiple share classes and more than a single shareholder since the document can be tailored to meet a company’s individual goals, ensuring all company members are fairly treated in adherence to the shareholders’ agreement.
If you need more information about the Model articles of association, or help with registering a business address, contact Your Virtual Office London, today.