ARTICLES OF ASSOCIATION
The Companies Act 2006 [CA2006] introduces one of the most fundamental changes in company law for many years by replacing the previous Memorandum & Articles of Association based on Table A Regulations with what is now simply the Articles of Association. Table A Regulations cease to exist and are replaced by the Model Articles prescribed in the Act, and the Memorandum now contains nothing more than a statement of intent to register a company and is a historic document of no further value following the incorporation of a company.
Companies registered under CA2006 have unrestricted objects so much of the content of the old Memorandum is no longer required except in the case of companies limited by guarantee where it may be preferred or necessary to include restricted objects. Some other case may occur where restricted objects will be necessary, but this is not so in the vast majority of circumstances.
Whilst the Model Articles now prescribed in the Act can be adopted in full, we believe this leaves much to be desired for the sake of the proper conduct and management of a company. Having taken Leading Council's legal advice on this issue, and in consultation with other members of the company registration industry, Company Registrations Online has prepared bespoke Articles of Association that expand on the model articles so as to ensure all companies we register are properly equipped to benefit from the new Act as far as is practicable. We use these Articles in place of the Model Articles for all our formations.
Our bespoke Articles are prepared by senior lawyers with over twenty years’ experience as members of the Law Society Standing Committee on Company Law. They are approved and endorsed by The Association of Company Registration Agents Ltd (ACRA), who are the company registration industry’s only formal recognised body who act regularly for the representation of the industry in conjunction with the Registrar of Companies, HMRC and HM Treasury.
We understand that many smaller registration agents do not offer any alternative and advise clients to register companies by adopting the Model Articles, thus saving cost and effort in producing bespoke articles. The same is true of Companies House who only use Model Articles for companies incorporated through their own service. However, we strongly believe that they are far too simplified for practical purposes and will possibly cause potential problems in the future operation of the company. The following highlights some of the key features:
- the Model Articles do not allow for the issue of nil or partly paid shares;
- they make no proper provision for multiple classes of shares;
- they do not contain provisions for alternate directors which could be useful for companies where directors are to be absent for extended periods;
- they contain no provisions expressly covered by the Act such as members’ rights, proxies, meetings regimes, share pre-emption or directors conflicts, assuming instead that all directors have sufficient knowledge of the Act in detail – clearly an unreasonable assumption in the majority of owner managed businesses;
- they do not contain any provisions for a change of name to be effected by board resolution;
- they only allow for a Director's written resolution to be passed by a unanimous decision;
- they include no provision for the appointment of a company secretary if the company has one.
By way of comparison, the Model Articles prescribed in the Act for private companies limited by shares contain 53 paragraphs. Bespoke Articles provided by Company Registrations Online contain no less than 85 paragraphs.
Please see our page on Articles of Association under our Support section for more information about updating the Articles of companies incorporated under previous Companies Acts.