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August 27, 2026
Can Articles of Association Limit a Director’s Powers?
Yes. A UK company’s Articles of Association can limit the powers of its directors and require shareholder approval before directors take certain actions.
The Articles can also regulate how directors make decisions, delegate authority, manage conflicts of interest and approve major transactions.
Under the standard model Articles, directors are responsible for managing the company’s business and may exercise all the company’s powers, subject to the Articles.
This normally gives directors broad authority to make day-to-day business decisions without obtaining shareholder approval for every action.
However, that authority is not unlimited. Directors must comply with:
The Articles can reserve certain decisions for shareholders.
Directors may be required to obtain approval before:
These provisions are often called reserved matters.
The Articles can prevent one director from acting alone and require decisions to be made collectively by the board.
They may require:
This can reduce the risk of one director making an important decision without consulting the others.
The Articles can specify the minimum number of directors who must participate before a board meeting can make valid decisions.
They may also require a particular director or category of director to be present for certain matters.
Poorly drafted quorum provisions can create deadlock, especially in a company with only two directors.
The Articles may control whether directors can delegate their powers to:
They can also define which powers cannot be delegated and what conditions apply to any delegation.
The Articles can establish procedures for directors who have an interest in a company transaction.
They may determine:
These rules must operate alongside the director’s statutory duties.
Customised Articles can impose financial limits on directors.
For example, they may require additional approval before directors:
The thresholds should be reviewed as the company grows.
The standard model Articles include a shareholder reserve power.
This allows shareholders, by special resolution, to direct the directors to take—or refrain from taking—a specified action.
However, the resolution does not normally invalidate something the directors completed before the resolution was passed.
A director who acts outside the authority given by the Articles may breach:
Possible consequences may include:
The outcome depends on the nature of the restriction, the transaction and whether the company later approves the action.
Not necessarily.
Under section 40 of the Companies Act 2006, a person dealing with a company in good faith may be protected even when the directors’ authority is limited by the company’s constitution.
This means a contract may still bind the company even though the director breached an internal restriction.
For example, the Articles may require shareholder approval before the company borrows more than £500,000. If a director enters into a loan without obtaining that approval, the lender may still be protected if it dealt with the company in good faith. However, the director may face internal consequences for exceeding their authority.
This distinction is important:
Special rules and exceptions can apply, including transactions involving directors or connected persons.
Yes. A shareholders’ agreement may require shareholder consent before directors take specified actions.
However, a shareholders’ agreement is a private contract. It does not operate in exactly the same way as the Articles.
If a restriction is commercially important, the company may include it in:
The provisions should be consistent to avoid uncertainty.
Yes. A company can amend its Articles to increase, reduce or reorganise directors’ powers.
The change will normally require:
The special resolution and amended Articles must normally be filed within 15 days of the relevant event.
No. The Articles cannot remove the statutory duties directors owe under company law.
Directors must continue to:
The Articles can regulate directors’ authority, but they cannot permit directors to ignore the law.
Usually not.
Requiring shareholder approval for routine decisions can slow down the company and make it difficult for directors to manage the business effectively.
A balanced structure normally allows directors to handle ordinary operations while reserving major decisions for shareholders.
Reserved matters should be:
A UK company’s Articles of Association can limit directors’ powers by reserving important decisions for shareholders, imposing financial thresholds, regulating delegation and establishing board-voting requirements.
However, an internal restriction does not always prevent a transaction from binding the company where a third party acts in good faith. A director who exceeds their authority may still face internal consequences or liability to the company.
Companies introducing director restrictions should ensure that the Articles, shareholders’ agreement and board procedures work together.
This article provides general information and does not constitute legal advice.
