Articles of Association
of [Insert Company Name] Limited
Applying from [Insert Date]
These Articles apply under the Companies Act, 2006 and any other legislation which changes it, (“the Act”) for a private company limited by shares.
Limitation of Legal Responsibility
Legal Responsibility of Shareholders
- 2.1 The legal responsibility of the shareholders is limited to the amount, if any, which they have yet to pay for the shares held by them.
Director's Powers and Responsibilities
Directors’ General Authority
- 3.1 The directors are responsible for the management of the Company's business, and they may exercise all the powers of the company.
Also included in this document:
4. Shareholders’ Power
5. May Delegate
7. Directors are to take Decisions Collectively
8. Directors’ Written Resolutions
9. Calling a Directors’ Meeting
10. Participation in Directors’ Meetings
11. Minimum number of People Present for Directors’ Meetings
12. The Chairing of Directors’ Meetings
13. Casting Vote
14. Transactions or other Arrangements with the Company
15. Directors’ Conflicts of Interest
16. Records of Decisions to be Kept
17. Directors Allowed to make Further Rules
18. Number of Directors
19. Methods of Appointing Directors
20. Ending of Director's Appointment
21. Directors' Pay and Benefits
22. Director's Expenses
23. Appointment and Removal of Substitute Directors
24. Rights and Responsibilities of Substitute Directors
25. Ending of a Substitute Directorship
26. Appointment of a Secretary
27. All Shares to be Fully Paid for
28. Powers to Issue Different Types of Share
29. Company only Bound by Direct Ownership of Shares
30. Share Certificates
31. Replacement Share Certificates
32. Share Transfers
33. Allowed Transfer of Shares
34. First Right to Buy if there is any other Proposed Transfer
35. Tagging Along with a Share Sale
36. Being Dragged Along with a Share Sale
37. Other Compulsory Transfers
38. Shares Acquired Through Death or Bankruptcy
39. Procedure for Declaring Dividends of Profits
40. Payment of Dividends of Profits and other Distributions
41. No Interest in Distributions
42. Unclaimed Distributions
43. Non-Cash Distributions
44. Giving up Distributions
45. Authority to turn Profits into Shares
46. Attendance and Speaking at General Meetings
47. Minimum Number of People for General Meetings
48. Chairing General Meetings
49. Attendance and Speaking by Directors and Non-Shareholders
51. Voting: General
52. Errors and Disputes
53. Poll Votes
54. Proxy Notices
55. Delivery of Proxy Notices
56. Amendments to Resolutions
57. Methods of Communication
58. Company Seals
59. No Right to Inspect Accounts and Other Records
60. Provision for Employees on the Business Ending
Tip Sheet for Corporate Structure
Creating a Company
If you incorporate a company you have the protection of “limited liability”, which means that you are not personally responsible for all the company’s losses. If you are trading as an individual you do not have this protection.
There are formalities involved in owning and transferring shares which you need to comply with. For example you need to follow “pre-emption” procedure in the Company Articles which give existing shareholders the right to bid for shares which another shareholder wants to sell. You also need to document share transfers and keep the company’s records (or “Statutory Books”) up to date. Share transfers also need to be accompanied by a “stock transfer form” to the receiver. If you don’t follow these procedures there will be uncertainty about your share ownership which could cost you when you seek investment or a sale.
If you grant options to someone to buy shares, there must be certainty as to when the options are to be exercised or to fall away. They must also be exercised at the latest if there is a sale of the company. If all this is not clear it will create problems for you with investors and buyers. Options also need to be structured carefully so that they are dealt with in a way that is tax-efficient for everybody – this normally needs legal advice.
Filing Records at Companies House
Companies have to comply with the Companies Act 2006 in the way that they file forms. There are many different types of form which must be filled in properly and delivered on time. If you don’t do this it can result in fines being paid by the directors or the company. It can also be expensive to put these kinds of mistakes right.
Directors have lots of duties. They must avoid conflicts between their own interests and the Company’s interests and they must take certain things into account when they are making their decisions. If Directors ignore these duties then it can result in transactions they are involved with for the Company being set aside. The Directors may even be liable personally for their failure to observe these duties.
When you share important information with others about the Company’s projects, plans or financial information, you should make sure that the information is properly protected by using a Confidentiality Agreement. This gives you a legal remedy if someone uses that information in a way which the agreement doesn’t allow. It will also give confidence to investors and shareholders that you are protecting information which is key to the company.
When you pay out “dividends” or profits to shareholders, there are rules you must comply with. Normally, you can only pay dividends out of genuine profits. If you don’t have those profits or you need to give capital back to shareholders and you still pay a dividend, you may be in trouble. Directors who authorise unlawful dividends may have to personally repay the money to the company.
Your Articles of Association
Company Articles are important. They are the operational rule-book for the company. So, they should be up-to-date and enable you to do everything that the company needs you to do. Issues to think about could include – if I want to sell the company can other minority shareholders be required to sell? Can they request that their shares are sold when other share sales are taking place? Do certain shareholders need particular controls which should be included in the Articles?
LawBite Legal Advice
LawBite professional advisors can help you straightaway with all of these issues and more. Just go to the the Legal Advice section and make your enquiry. We’ll get back to you within 24hrs with a meaningful response.
Clive Rich is a highly experienced entertainment and digital media lawyer, who has also successfully run digital businesses for companies such as Sony and Bertelsmann.
A qualified barrister, he has been a lawyer for almost 30 years and has drafted and crafted contracts for a broad spectrum of multi-nationals, major organisations and brands, including Yahoo, Apple, Napster, SanDisk, Myspace and the BBC.
He has also previously run his own legal practice, Rich Futures Ltd in association with the Top 30 UK law firm, Olswang LLP, representing a variety of technology companies and SMEs.
Clive is a qualified Mediator through the Centre for Effective Dispute Resolution (CEDR) and a qualified Arbitrator through the Central Institute of Arbitration (CIArb) in London.
As a negotiator, he is the author of “The Yes Book: the Art of Better Negotiation”, published by Random House in March 2013. Clive has also designed and successfully launched a negotiation App called “Close My Deal”, enabling people to understand the basis of successful negotiation and apply the skills to everyday scenarios. He has provided negotiating coaching and deal making services to a wide range of large organisations and SMEs. He has also been a board member of a number of digital SMEs.
Clive is a devoted father and husband, but when he is not spending time with his family, he likes to unwind by playing golf or watching a variety of sports (football, rugby, cricket). He's a lifelong Milwall FC fan... but don't hold that against him!
Step By Step Guide
When To Use this document:
This is a model set of Articles of Association for a Company which covers the Company's operational activities