What they are, what they do, and why they are important.
Articles of Association are the rules and regulations that govern the internal workings and management of a company.
They outline the rules of the company’s operations, share capital and the required voting percentage to approve certain decisions (resolutions). Articles of Association also govern the responsibilities of and relationships between the company’s directors, shareholders and officers.
When a company is incorporated, it will typically adopt the Companies Act 2006 Model Articles – though it is possible to incorporate with custom articles (startups using incubators or accelerators are sometimes required to adopt their articles).
A company is required to have Articles of Association to ensure its key stakeholders have a clear framework and rules for how the company operates. Without articles, there could be a conflict between the company’s stakeholders, or individuals could make their own decisions without authorisation from other stakeholders.
What do articles cover?
Broadly speaking, Articles of Association cover the following:
- Decision making: What authorisation or voting percentage is required to pass decisions surrounding the company’s stakeholders, share capital and operations.
- Share capital: The company’s share classes and rights attached to each class (such as voting and dividends). Plus rules around creating new shares and issuing or transferring shares.
- Director duties: The powers and restrictions of directors, as well as the process for appointing and removing directors.
- Shareholder protections: Any minority shareholder protections and clauses that state if/when shares must be sold (e.g. during an exit event).
We go into more detail about the key clauses and provisions in the Vestd Articles of Association.
Can a company change its Articles of Association?
Of course! Whether you want to adopt the Vestd Articles or create your own bespoke articles, the process is straightforward for Vestd customers.
Depending on your company’s current articles, a directors’ and/or shareholders’ resolution will be needed to authorise the change.
First, you'll need to create and send a resolution to the required people through Vestd.
Go to Secretarial & admin > Resolutions > Create a bespoke resolution to start the process. State the reason for the resolution (in this case Custom Articles of Association), select Directors/Board as those who need to sign it and enter the pass percentage.
If you’re adopting custom articles, you can include our pre-defined text to the body of the resolution, or enter your own text to explain what the resolution is for.
And don’t forget to attach a copy of the new Articles of Association so they can read through them!
Then click Continue, review the details of the resolution, and when you’re happy to proceed click Send for signing.
If a shareholders’ resolution is also required, we recommend creating it before sending the directors’ resolution. This is because you can make the shareholders’ resolution dependent on the directors’ resolution, meaning it will be sent for signing automatically once the directors’ resolution passes.
Create the shareholders’ resolution via the same process, then select the resolution it’s dependent on from the dropdown menu at the bottom of the form and click Save.
Navigate back to your resolutions index page and send the directors’ resolution for signing. Once that passes, the shareholders’ resolution will be sent out – and when that passes, your company will formally adopt its new articles.
We’ll also send a copy of the Special Shareholder Resolution and your Articles to Companies House.
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice'.