The Articles of Association of a limited liability company are an essential element of any limited company formation since the Articles of Association set out the rules and regulations by which the internal affairs of the company are governed.
Articles of Association
The Articles of Association of every company must adhere to certain administrative rules in that they must be printed and divided into paragraphs numbered consecutively. When submitting the Articles of Association to Companies House during a company formation the Articles must also be signed by the same persons who have signed as subscribers to the company formation Memorandum of Association.
The Articles of Association is a long document set out in a specific manner and covering items such as the issue and allotment of shares and capital, procedures to be adopted at meetings, borrowing powers and precise details relaying to the office of director. It is normal for the Articles of Association to state rules on the appointment, voting and removal of directors.
A company limited by shares can adopt a standard set of Articles, Table A. When a new company limited by shares is being formed and adopts Table A unmodified it is not required that the new company submits Articles of Association. However when adopting Table A unmodified the persons forming a company must include a letter to Companies House stating that the Articles of Association, Table A are being adopted in unmodified terms.
Table A is a standard set of Articles of Association for a company limited by shares. The unmodified Table A can be changed at a later date after the limited liability company formation by special resolution which should be approved by the members in a general meeting.
After passing the special resolution to change the Articles of Association a copy of that resolution must then be registered with the Company registrar. In addition all future copies of the Articles of Association should include the modification
If Table A is adopted without modification then the company being formed must appoint at least two directors. A private company can have just one director provided the Articles of Association permit a single director in which case a modified Table A must be delivered to Companies House incorporating the changes made.
Every new limited company must have at least one director and one company secretary. A sole director may not also be the company secretary while if there are two or more directors one of those directors can also be designated and act as company secretary.
No special qualifications are required for the company secretary of a small private company. Qualifications are required for the post of company secretary in a public limited company
Different company registration rules apply for a company that is not a company limited by shares. Other model sets of Articles of Association would be applicable and must be delivered to Companies House when forming a company and completing the company registration. Tables C, D and E are Articles of Association applicable to a company limited by guarantee both with and without shares and an unlimited company.
One essential consideration every potential member of a new company should be to read and understand the provisions contained within the Articles of Association. When a business goes well and all members and directors are in agreement few problems arise. But nothing lasts forever and excluding amending the Articles of Association future directors and their relationship with each other and management of the company are governed by the Articles.
It is quite common for a company that has a controlling shareholder to adopt a modified set of Articles. Such modifications generally removing many of the restrictive practises a director may adopt with other changes to voting rights.