Do I need to update my Articles when creating a new share class?
A quick guide to when an Articles update is required under Model, Vestd or custom Articles.
When creating a new class of shares, whether your Articles of Association (AoA) need to be updated depends on the type of Articles your company has and how those Articles are drafted.
Contents📋
Model Articles or Vestd Articles
If your company uses Model Articles or Vestd Articles, an Articles update is not usually required when creating a new class of shares.
This is because:
- Model Articles allow companies (with the appropriate authorisation) to create new share classes without redrafting the Articles.
- Vestd Articles group all ordinary share classes under the definition of “A Shares”, meaning new ordinary classes typically fall within the existing drafting.
Unless one of the exceptions below applies, you can generally proceed without updating your Articles.
Exceptions
Custom / Bespoke Articles
If your company has custom Articles, an update may be required before creating a new class of shares. This depends entirely on how the Articles are written, therefore you should clarify the required steps with lawyer who drafted the Articles.
A shareholder resolution alone will not be sufficient in the following situations, so an Articles update may be necessary:
Class‑level hurdles
If the new class includes a hurdle (for example, “distributions only to the extent the company value exceeds £30,000,000”), that hurdle is a class‑specific economic right.
Because class‑specific rights must be written directly into the Articles, a simple resolution isn’t enough. In most cases, this means the Articles will need to be updated before the new class can be created.
Existing Preference Shares / Waterfall Provisions
f your company already has Preference shares, your Articles will include a distribution waterfall that sets out the order in which different share classes receive proceeds.
When a new class of shares is created, it must be added to that waterfall so the Articles accurately reflect how distributions should work. Because the waterfall is written directly into the Articles, updating it typically requires an Articles amendment rather than a simple resolution.
Pre‑emption rights
If the new class is being created by allotment and issue, pre‑emption rights may apply. These rights determine whether existing shareholders must be offered the new shares first.
There are two types:
-
Statutory pre‑emption rights
These come from company law and can be disapplied by passing a special resolution.
-
Contractual pre‑emption rights
These are written into the Articles. They can only be disapplied if the Articles specifically allow it — usually via a special resolution or unanimous member waiver.
If your Articles do not permit the disapplication of contractual pre‑emption rights, the company may need to update the Articles before the new class can be created.
Setting up the new class on Vestd
When you create a new class of shares on Vestd, we’ll ask for the information needed to ensure the class is set up correctly.
-
Particulars and economic rights
The particulars you provide must accurately reflect the rights of the class. These details feed directly through to each recipient’s My Equity page, helping them understand the economic rights associated with the shares or options they hold.
-
Hurdles and economic conditions
If the new class includes a hurdle, we’ll ask you to confirm the relevant details. Once provided, we’ll ensure the class‑level hurdle is configured during setup. This helps ensure the rights are displayed and calculated accurately across the platform.
Unsure?
If you are not certain whether your Articles need to be updated, it is best to check with the lawyer who drafted them.
Vestd can help you understand the process, but any guidance or support should not be considered legal, tax or financial advice.
Related FAQs
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.'