By
August 27, 2026
What Happens If a Company Does Not Follow Its Articles?
If a UK company does not follow its Articles of Association, a decision may be challenged, directors may breach their legal duties and shareholders may take action against the company or those responsible.
However, not every breach produces the same result. The consequences depend on the rule that was broken, who committed the breach and whether an outside party was involved.
Yes. The Articles form part of the company’s constitution.
Under section 33 of the Companies Act 2006, the company’s constitution binds the company and its members as though they had agreed to comply with its provisions.
The Articles are therefore not simply internal guidance. Directors, shareholders and the company must follow the relevant rules when making decisions.
A company may fail to follow its Articles by:
The effect of the breach will depend on the wording of the Articles and the surrounding circumstances.
Possibly.
A decision may be invalid or open to challenge if the company failed to follow an essential procedural rule.
For example, a board decision could be challenged if:
Some procedural errors may be capable of correction or ratification. Others may require the decision to be taken again using the proper procedure.
The company should not assume that every irregular decision is automatically valid or automatically void.
Potentially. Directors have a statutory duty to act within their powers.
Under section 171 of the Companies Act 2006, directors must:
A director who knowingly acts outside the Articles may breach this duty.
Depending on the circumstances, the director could be required to:
Liability is not automatic and will depend on the breach, the loss caused and whether the action was properly approved or ratified.
Not necessarily.
A third party dealing with the company in good faith may be protected even if a director exceeded an internal restriction.
Under section 40 of the Companies Act 2006, directors’ power to bind the company is generally treated as free from constitutional limitations in favour of a person dealing with the company in good faith.
For example, the Articles may require shareholder approval before the company borrows more than £500,000. If a director obtains the loan without approval, the loan may still bind the company where the lender acted in good faith.
However, the director may still have breached the Articles and their duties to the company.
Yes. Depending on the circumstances, shareholders may seek:
Legal action should usually be treated as a last resort after the company has investigated whether the breach can be corrected internally.
A shareholder may be able to petition the court if the company’s affairs are being conducted in a way that unfairly prejudices the interests of some or all shareholders.
This right appears in section 994 of the Companies Act 2006.
Repeatedly ignoring voting rights, dividend rights or minority protections in the Articles could contribute to an unfair-prejudice claim.
Possible court orders may include requiring one shareholder to purchase another shareholder’s shares, although the appropriate remedy depends on the case.
Some breaches may be approved or ratified after the event, but ratification is not always possible.
The appropriate process may involve:
The shareholders eligible to vote on ratification can be restricted in certain cases, particularly where the conduct of a director is being approved.
An unlawful act cannot be made lawful simply by passing a resolution.
Not necessarily. If the breach was an isolated mistake, the company may only need to correct the decision and improve its procedures.
An amendment may be appropriate if the existing Articles:
Changing the Articles normally requires a special resolution and the appropriate Companies House filings.
A breach of the Articles is not automatically a criminal offence.
However, the same conduct may also breach the Companies Act 2006 or another law. This can create separate civil or criminal consequences.
Examples may include:
The legal consequences depend on the underlying conduct, not only the failure to follow the Articles.
The directors should act promptly.
Review the Articles and confirm exactly which rule was not followed.
If the transaction has not been completed, avoid proceeding until the company understands the legal position.
Prepare a clear record of:
Review:
The company may need to repeat the decision, obtain approval, update its records or complete a missing filing.
Professional advice should be considered where the breach involves significant money, ownership, shareholder rights, director liability or an outside party.
A company can reduce the risk by:
Failing to follow the Articles of Association can make company decisions open to challenge and may expose directors to claims for acting outside their powers.
Shareholders may seek court orders or other remedies, especially where the breach affects their voting, dividend or ownership rights. However, transactions with third parties acting in good faith may still bind the company.
The company should investigate the breach promptly, stop any incomplete action and determine whether the decision can be corrected, approved again or lawfully ratified.
This article provides general information and does not constitute legal advice
