Articles of association are the internal rules that govern how a UK limited company is managed. They explain how directors make decisions, how shareholders vote and how shares are issued, transferred or otherwise administered.

Every UK registered company must have articles of association. They form part of the company’s constitution and are legally binding on the company and its members.

The articles are often described as the company’s internal rulebook.

What Is the Purpose of Articles of Association?

The articles establish the framework within which the company operates.

They can regulate:

  • Directors’ powers and responsibilities
  • Board meetings and decision-making
  • Appointment and removal of directors
  • Shareholder meetings
  • Shareholder voting
  • Written resolutions
  • Issuing and transferring shares
  • Different share classes
  • Dividends and other distributions
  • Conflicts of interest
  • Share certificates
  • Company records
  • Communication with shareholders

The Companies Act 2006 provides the wider legal framework, while the articles contain rules tailored to the company’s internal management.

Does Every UK Limited Company Need Articles?

Yes. Every UK limited company must have articles of association.

This includes:

  • Private companies limited by shares
  • Private companies limited by guarantee
  • Public limited companies
  • Community interest companies
  • Dormant companies
  • Companies with only one shareholder

A company cannot choose to operate without articles.

What Are Model Articles?

Model articles are standard articles prescribed by law.

Separate versions are available for:

  • Private companies limited by shares
  • Private companies limited by guarantee
  • Public companies

Many small private companies adopt the model articles because they provide a straightforward set of governance rules.

A company may:

  • Adopt the model articles in full
  • Adopt them with amendments
  • Use completely bespoke articles

Companies House provides the model articles but does not prepare bespoke articles for individual companies. Companies House guidance

What Happens If a Company Does Not Submit Bespoke Articles?

When an eligible company is formed without registering bespoke articles, the relevant model articles normally apply by default to the extent that they have not been excluded or modified.

The applicable version depends on the company’s legal type and date of incorporation.

The company should keep a copy of the articles that apply to it rather than assuming the latest model version automatically governs an older company.

What Do Model Articles Cover?

For a private company limited by shares, the model articles address matters such as:

  • Directors’ general authority
  • Directors’ collective decision-making
  • Unanimous decisions
  • Calling board meetings
  • Quorum for directors’ meetings
  • Conflicts of interest
  • Appointment and termination of directors
  • Share allotments
  • Different share classes
  • Share transfers
  • Dividends
  • Shareholder voting
  • General meetings
  • Written shareholder resolutions
  • Notices and communications

They are designed for relatively straightforward companies and may not suit every ownership arrangement.

Are Model Articles Suitable for Every Company?

No. Model articles may be suitable for a simple company with one share class and uncomplicated ownership.

Bespoke or amended articles may be more appropriate where the company has:

  • Several founders
  • A 50/50 ownership structure
  • Multiple share classes
  • Preference or non-voting shares
  • External investors
  • Employee shares or options
  • Special director-appointment rights
  • Minority shareholder protections
  • Detailed transfer restrictions
  • Compulsory-transfer rules
  • Specific succession arrangements
  • Enhanced voting rights

The company should review whether the model rules reflect how its owners intend the business to operate.

What Are Bespoke Articles?

Bespoke articles are articles drafted or modified for a particular company.

They may include provisions covering:

  • Founder control
  • Investor consent rights
  • Multiple-vote shares
  • Preference shares
  • Alphabet shares
  • Non-voting shares
  • Employee leaver provisions
  • Restrictions on share transfers
  • Drag-along and tag-along rights
  • Director appointment rights
  • Deadlock procedures
  • Reserved matters
  • Different dividend rights
  • Conversion or redemption of shares

Bespoke provisions must comply with the Companies Act 2006 and other applicable law.

How Do Articles Affect Directors?

The articles explain how directors exercise their powers and make decisions.

They may regulate:

  • The minimum and maximum number of directors
  • Appointment and removal procedures
  • Board-meeting notices
  • The quorum for board meetings
  • Majority voting
  • Casting votes
  • Written director decisions
  • Conflicts of interest
  • Delegation of powers
  • Director remuneration and expenses

Directors must act within the powers provided by the company’s constitution.

Acting outside those powers may breach a director’s statutory duties, even if the director believes the decision benefits the company.

How Do Articles Affect Shareholders?

The articles define how shareholders participate in the company.

They may explain:

  • Which shares carry voting rights
  • How shareholder resolutions are passed
  • How general meetings are called
  • Whether shareholders can appoint directors
  • How dividends are distributed
  • When shares may be transferred
  • Whether existing shareholders have first-refusal rights
  • What happens when a shareholder dies
  • How different share classes are treated

Shareholders should review the articles before acquiring shares because the documents directly affect their rights.

How Do Articles Affect the Share Structure?

The articles may define the voting, dividend, capital and redemption rights attached to different classes.

For example, they may provide that:

  • Ordinary shares carry one vote each
  • Preference shares receive priority dividends
  • Non-voting shares carry no general voting rights
  • Growth shares participate only above a particular value
  • Redeemable shares can be bought back under agreed terms

The class rights should be consistent with the prescribed particulars in the company’s statement of capital.

Can the Articles Restrict Share Transfers?

Yes. Private-company articles often restrict how shares can be transferred.

Possible restrictions include:

  • Director approval
  • Rights of first refusal
  • Transfer pre-emption rights
  • Permitted family transfers
  • Restrictions on transfers to competitors
  • Compulsory transfers when an employee leaves
  • Valuation procedures
  • Restrictions during an agreed lock-in period

The directors must follow the articles when deciding whether to register a transfer.

Can the Articles Control Dividends?

Yes. The articles may explain:

  • Who recommends or declares dividends
  • How dividends are calculated
  • Which share classes can receive them
  • Whether different classes have priority
  • How unpaid dividends are treated
  • How distributions are made

The company can pay dividends only from legally available distributable profits and according to the rights attached to each class.

The articles cannot authorise an unlawful distribution.

Can the Articles Change Statutory Voting Thresholds?

The articles can impose additional or higher approval requirements in some circumstances, but they cannot generally remove mandatory statutory protections.

For example, they may require unanimous approval for a particular internal decision even where company law would otherwise permit a lower threshold.

Some articles contain entrenched provisions that can be amended only when special conditions are met.

Legal advice should be obtained before adding unusual voting thresholds or entrenched provisions.

What Is an Entrenched Provision?

An entrenched provision is a rule in the articles that is more difficult to change than an ordinary article.

For example, it may require:

  • Unanimous shareholder approval
  • Approval from a particular shareholder
  • Consent from a specified share class
  • A percentage higher than the usual 75% special-resolution threshold
  • Satisfaction of another stated condition

Companies with entrenched provisions must comply with additional Companies House notification requirements.

Are Articles of Association Public?

Yes. A company’s registered articles are generally available through the Companies House public register.

Anyone may be able to view or download them.

Companies should avoid placing unnecessary confidential commercial information in the articles. Some private arrangements may instead be included in a shareholders’ agreement, although important constitutional rights may need to appear in both documents.

What Is the Difference Between Articles and a Shareholders’ Agreement?

The articles are part of the company’s constitution and are publicly filed. They bind the company and its members in their capacity as members.

A shareholders’ agreement is a private contract between some or all shareholders and, sometimes, the company.

A shareholders’ agreement may cover more detailed commercial matters, including:

  • Founder responsibilities
  • Funding obligations
  • Dividend policy
  • Reserved matters
  • Deadlock procedures
  • Shareholder departures
  • Confidentiality
  • Competition restrictions
  • Sale arrangements
  • Dispute resolution

The two documents should be consistent. A private agreement does not automatically override the company’s articles or the Companies Act 2006.

What Is the Difference Between Articles and the Memorandum?

The memorandum of association confirms that the original subscribers agreed to form the company and become its members.

For a company limited by shares, it also confirms that each subscriber agreed to take at least one share.

The memorandum is an incorporation document and cannot normally be amended after the company is formed.

The articles are the continuing rules governing how the company operates. They can be amended after incorporation by following the proper procedure.

Can Articles Limit What a Company Does?

Companies incorporated under the Companies Act 2006 generally have unrestricted objects unless their articles restrict them.

A company may voluntarily include an objects clause limiting its activities.

Older companies may have historic objects provisions treated as part of their articles.

Restrictions should be reviewed carefully because directors must act within the company’s constitution.

Can Articles Be Changed?

Yes. Shareholders can normally amend the articles by passing a special resolution.

A special resolution generally requires at least 75% of the votes cast by eligible shareholders.

The company should:

  • Prepare the proposed amendments
  • Give shareholders the required notice
  • Pass the special resolution
  • Prepare a complete updated copy of the articles
  • File the resolution with Companies House
  • File the amended articles
  • Update its internal records

The company must generally file the special resolution within 15 days after it is passed and the amended articles within 15 days after they take effect. GOV.UK guidance

When Should a Company Review Its Articles?

The articles should be reviewed when:

  • A new investor joins
  • New shares are issued
  • A new share class is created
  • Voting or dividend rights change
  • A shareholders’ agreement is introduced
  • An employee share scheme is created
  • Ownership changes significantly
  • A founder or shareholder leaves
  • The company prepares for sale
  • The company creates a group structure
  • The current rules cause a deadlock
  • The law changes

Companies formed many years ago should check whether their articles reflect current law and business arrangements.

What Happens If a Company Does Not Follow Its Articles?

Failure to follow the articles may result in:

  • Invalid or challengeable decisions
  • Shareholder disputes
  • Breach-of-duty claims against directors
  • Problems with share issues or transfers
  • Difficulties during investment
  • Delays in a company sale
  • Court proceedings
  • Financial loss

A decision may sometimes be ratified or corrected, but this depends on the circumstances.

Directors and shareholders should check the articles before making significant decisions.

Where Can a Company Find Its Articles?

A company may find its articles:

  • In its incorporation documents
  • In its statutory records
  • Through its company-formation agent
  • With its accountant or solicitor
  • On the Companies House public register

If the articles have been amended, the company should use the latest complete version together with any relevant resolutions and restrictions.

Do Sole-Director Companies Need Special Articles?

A company with one director and one shareholder should review whether its articles permit its intended decision-making arrangements.

Some older or amended articles may create uncertainty about whether one director can form a quorum.

A company should not assume that every version of the model articles operates identically. Professional advice may be appropriate where the company has a sole director but its articles refer to a minimum board quorum.

Common Mistakes to Avoid

Companies should avoid:

  • Never reviewing the model articles
  • Using articles that conflict with a shareholders’ agreement
  • Creating share classes without defining their rights
  • Issuing shares without checking directors’ powers
  • Ignoring transfer restrictions
  • Holding board meetings without the required quorum
  • Paying dividends inconsistently with class rights
  • Failing to follow conflict-of-interest procedures
  • Amending articles without a valid resolution
  • Missing the 15-day filing deadlines
  • Filing only the amended pages instead of a complete updated version
  • Relying on an outdated copy

Frequently Asked Questions

Are Articles of Association Mandatory?

Yes. Every UK registered company must have articles.

Are Model Articles Free?

Yes. Standard model articles are prescribed by law and published for the main company types.

Can a Company Write Its Own Articles?

Yes. A company can adopt bespoke articles, provided they comply with applicable law.

Can One Shareholder Change the Articles?

A sole shareholder with the necessary voting rights can generally pass the required special resolution and change the articles.

Do Articles Show Who Owns the Company?

No. The articles explain the company’s rules and share rights, but the register of members records who owns the shares.

Do Articles Expire?

No. They continue to apply until they are validly amended, replaced or affected by a change in law.

Final Summary

Articles of association are the legally binding internal rules that govern how a UK limited company operates.

They regulate directors’ decisions, shareholder voting, shares, dividends, meetings and other important company procedures. A straightforward company may use model articles, while companies with several founders, investors or share classes may require bespoke provisions.

The articles should reflect the company’s actual ownership and management arrangements. They should also be reviewed whenever the share structure, investors or decision-making rules change.

This article provides general information and does not constitute legal, tax or financial advice.

‍

‍
UKcompany.blog assumes no responsibility or liability for any errors or omissions in the content of this website or blog. The information contained in this website or blog is provided on an "as is" basis with no guarantees of completeness, accuracy, usefulness, or timeliness.