Summary
- A company may amend its articles by passing a special resolution, which requires at least 75% of eligible shareholder votes in favour.
- Amendments that interfere with shareholders’ right to pass future special resolutions, or that alter the threshold for removing directors, have no legal effect.
- Once a special resolution passes, the company must file a copy of the resolution and the amended articles with Companies House within 15 days.
- This guide explains how to change articles of association for business owners and company directors in the United Kingdom.
- LegalVision’s business lawyers specialise in advising clients on corporate governance and company constitution amendments.
Tips for Businesses
Before proposing any amendments, obtain the current articles from Companies House and identify exactly which provisions need to change. Draft the wording precisely, ensure the special resolution reaches the 75% threshold, and file a copy of the resolution with the amended articles at Companies House within 15 days.
A company’s articles of association is a constitutional document that governs a company’s internal management and shareholder rights under Australian corporate law, as regulated by the Corporations Act 2001 (Cth) and administered by ASIC. It operates as a binding contract between the company, its directors, and its shareholders. This article explains the procedure for changing your company’s articles of association and highlights key considerations.
What Are Articles of Association?
All companies must have articles of association. Articles typically take three main forms:
- unamended model articles of association;
- amended model articles of association; and
- bespoke (tailored) articles of association.
The Model Articles are generic articles that apply by default (under the Companies Act 2006), and set out basic rules governing the company. Small companies may seek to rely on these.
Larger companies and those incorporated with legal assistance may adopt bespoke articles suited to their particular needs and objectives. Bespoke articles are valuable for companies with complex ownership structures, multiple share classes, or specific governance requirements that standard model articles cannot adequately address. They allow provisions for the following:
- drag-along and tag-along rights;
- pre-emption rights on share transfers; and
- detailed decision-making procedures.
When Should I Change My Company’s Articles?
Articles of association can be amended where existing provisions restrict the company or its directors from taking desired actions.
Model Article 14 is another frequent target for amendment. In its unamended form, a director with an interest in a matter before the board cannot vote without shareholder approval by ordinary resolution. For small companies where directors and shareholders are the same individuals, this is often impractical, and the article is commonly amended or disapproved accordingly.
Articles should also be reviewed and amended ahead of significant structural changes, including:
- investment rounds;
- mergers; or
- acquisitions.
Investment transactions frequently require bespoke provisions such as:
- investor veto rights;
- board composition requirements; and
- exit mechanisms.
Other common reasons for amendment include:
- creating new share classes with special rights;
- establishing employee share schemes;
- implementing dividend policies; and
- introducing shareholder dispute resolution mechanisms.
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What Limits Are There on Changing My Company’s Articles?
A company is generally free to amend its articles as it sees fit, subject to following requirements in the Companies Act and any consents or processes set out in the company’s articles of association or shareholders agreement
However, there are certain matters that company law prevents a company’s articles from interfering with. For example, a company cannot amend its articles in any way that interferes with the:
- power of shareholders to change articles by special resolution;
- power of shareholders to pass written resolutions; or
- the statutory threshold for removing directors.
Amendments to a company’s articles must be passed by special resolution, requiring at least 75% of eligible votes cast in favour. This threshold cannot be lowered, and directors cannot be granted unilateral power to amend the articles. Any provision attempting to circumvent these requirements has no legal effect.
What is the Process for Changing My Company’s Articles?
Shareholders must pass a special resolution to change the company’s articles. Both shareholders and directors can propose resolutions to amend articles. As directors more commonly propose resolutions, below is a generic procedure for amending a company’s articles.
Below is the general procedure to follow:
Step 1: Board Meeting
The directors must convene a board meeting with appropriate notice. The directors must obtain a quorum to approve proposing a resolution to the shareholders to amend the company’s articles.
Step 2: Board Approval
At the meeting, the board must agree to the resolution’s wording for presentation to the shareholders. This typically requires a simple majority of the board, though your company’s articles may specify otherwise.
Step 3: Shareholder Resolution
The board must vote to convene a shareholders’ meeting by giving appropriate notice. Alternatively, they can propose the amendment via written resolution, which does not require a general meeting.
The shareholders must pass the resolution by special resolution, requiring at least 75% of eligible votes in favour. Directors must comply with proper procedures for giving notice of the meeting or circulating the written resolution.
Step 4: Implementation and Filing
If the shareholders pass the resolution with at least 75% of votes, the directors should convene a second board meeting to formally adopt the amended articles. They should also arrange to send the relevant documents to Companies House to comply with reporting obligations. These documents include a copy of the special resolution and, where appropriate, a copy of the amended articles.
This template helps you document important and major decisions or actions reached in board meetings.
Key Takeaways
The articles of association govern how the company is managed and specify which matters require shareholder approval. Given their fundamental importance, companies may periodically wish to change their articles. All amendments require approval by at least 75% of eligible shareholders via special resolution. Companies must comply with formal requirements when proposing and passing resolutions to amend articles.
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Frequently Asked Questions
What are a company’s articles of association?
You can think of a company’s articles of association as a rule book that sets out who has the authority to do certain things, like entering into transactions. Articles of association are the most important constitutional document for each company.
Where can I find a company’s articles of association?
You can search for any company registered in the UK on Companies House’s website, and the company’s articles will be available to download.
How long does it take to change a company’s articles of association?
The process of changing a company’s articles of association can vary in duration. Typically, it takes between 2-4 weeks from the initial board meeting to file the amended articles with Companies House. However, this timeline can be shorter for simple changes in small companies or longer for complex amendments in larger organisations.
Can a company operate without articles of association?
No, a company cannot operate without articles of association. Under the Companies Act 2006, every company must have articles of association. If a company is incorporated without filing bespoke articles, the relevant model articles will automatically apply by default.
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