When you set up a limited company in the UK, one of the key documents you’ll need is the articles of association. Think of these as the rulebook for how your company will be run. The UK offers a standard version called model articles of association, which many businesses use by default or as a starting point. But what exactly do these model articles cover, and are they the right fit for your business? Let’s break it down.
What do model articles of association include?
Model articles of association are a predefined set of rules that outline how a company should operate. These articles are prescribed by the Companies Act 2006 and automatically apply to most private companies limited by shares unless they choose to adopt customised articles. They're designed to cover standard operations and can be a simple, cost-effective solution for many businesses.
The key sections typically covered in model articles for private companies include:
Director powers and responsibilities: Explaining how directors are appointed, removed, and what authority they have.
Decision-making: How board meetings and voting procedures are conducted.
Shareholder rights and obligations: Rules governing the issuance, transfer, and ownership of shares.
Dividend distribution: Guidelines on how profits can be distributed to shareholders.
Company records and communication: Requirements for maintaining records and official communication processes.
💡Editor's insight: "People often mix up the memorandum of association (MOA) and articles of association (AOA). Here's the difference: The MOA is a legal document that officially creates your company, while the AOA sets out the rules for how it’s run. You’ll need both when setting up a new business!"
When is best to use model articles?
The flexibility and clarity of model articles make them a practical choice for many companies just starting out. Using model articles of association can be useful in several scenarios:
New businesses: Start-ups and small private companies often find model articles sufficient for their basic governance needs.
Single-director companies: Companies with one director and limited complexity may not need custom articles.
Companies with straightforward operations: If your business structure is simple, model articles can reduce setup time and legal costs.
When are model articles not suitable?
While model articles of association are a convenient option, they are not always appropriate for every business. You might need tailored articles if:
You have multiple share classes: Model articles do not address the specific rights associated with different types of shares.
Complex decision-making structures: If your company requires detailed rules about director or shareholder voting, customisation may be necessary.
Restrictive share transfer rules: Businesses that want to impose limitations on who can buy or transfer shares will need bespoke provisions.
Special shareholder agreements: If there are agreements among shareholders that need to be reflected in the articles, standard model articles may not be sufficient.
In these cases, creating or modifying articles to fit your company’s unique needs could ensure smoother operations.
Can you use model articles for companies with one shareholder?
Yes, model articles of association for private companies can be used when there is only one shareholder. The standard rules are flexible enough to accommodate single-shareholder companies, focusing on simplified processes for decision-making and governance. However, businesses with a single shareholder might still consider customising their articles to clarify succession plans or specific rights and obligations for future shareholders.
Can you change model articles of association?
Yes, companies can change model articles of association at any time, provided they follow the correct legal process. To amend the articles:
Propose the changes: A special resolution must be passed by the company’s shareholders, requiring at least 75% approval.
File with Companies House: Submit a copy of the updated articles and the special resolution (Form RES01) to Companies House.
Customising your articles allows you to create rules that better suit your business needs while maintaining compliance with the Companies Act 2006.
FAQs
Do model articles require a company secretary?
No, under the Companies Act 2006, there is no requirement for a private limited company to appoint a company secretary unless stated otherwise in the articles. Model articles do not include this requirement. However, some businesses may choose to have one for administrative convenience.
Does a private limited company have articles of association?
Yes, all private limited companies must have articles of association. When forming a company, you can either adopt the model articles of association by default or create bespoke articles tailored to your needs.
Can I write my own articles of association?
Yes, you can write your own articles of association or modify the model articles. However, it’s important to ensure that your customised articles comply with the Companies Act 2006 and do not contradict any mandatory legal provisions. Consulting with a small business solicitor or legal expert can help you draft articles that are legally sound and appropriate for your business.
Final thoughts
Model articles of association provide a straightforward, ready-made set of rules for running a company. They're a popular choice for many small businesses due to their simplicity and ease of use. However, not all companies will find the standard model articles suitable for their unique needs.
Whether you stick with the model articles or choose to customise them, understanding your company’s governance structure is key to running a successful business. If you’re considering changing articles of association or need help drafting bespoke articles, professional legal advice can provide the guidance and protection you need.
References
Model articles from Gov.UK