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You must have a company constitution as a private company operating in the UK. The company constitution consists of two primary constitutional documents. These are the memorandum of association and the company’s articles of association.
In some cases, you may amend your company constitution, particularly your company’s articles. For example, you might need to do this if you are making a big change to the structure of your company, such as restructuring.
This article will explain what a company constitution is, when you may wish to amend your company constitution and some of the ways of checking how to do so.
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What is a Company Constitution?
A company’s constitution contains rules on how a company can operate. When your company is being incorporated at Companies House for the first time, you must submit the first draft of your company’s constitutional documents. Companies House is the UK’s Registrar of Companies, and they control the incorporation and administration of companies and limited liability partnerships in the UK. The primary documentation will include a memorandum of association and articles of association. These two documents, taken together, form a company’s constitution.
The memorandum of association is a statement by the original stakeholders in the company, and it simply declares that those members are founding the company and will be taking at least one share of its share capital. The memorandum is typically only used to evidence a snapshot image of the company at the point at which it was founded.
The articles of association, on the other hand, contain the rules that govern the relationship between different stakeholders in your business. This will include rules on shareholders, company directors, and founders.
What Will the Articles of Association Cover?
A company’s articles of association can, in theory, contain provisions on anything (so long as it is not illegal). However, your company’s articles are its main governing document. If the company was incorporated after the Companies Act 2006 (2006 Act), this would be the primary legislation governing UK company law. Additionally, if your articles of association do not cover a specific provision, the relevant legislation will usually cover it.
Some specific points contained in a company’s articles will include:
- how the company will be managed;
- the company’s share structure;
- specific provisions on board meetings, such as quorum;
- how proposed changes must be carried out, for example, how your company constitution is to be amended;
- when a special resolution might be necessary;
- the powers of certain members of the company, such as its board of directors; and
- the rights of different classes of shareholders.
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When Will I Want to Amend my Articles of Association?
You can amend your articles of association in many different situations.
Firstly, you may be required to amend your articles. For example, new legislation passed by the UK government may make your existing constitution illegal. Similarly, a court or a regulatory authority may instruct you to change your constitution.
Second, please update it to reflect the current situation of your company. For example, if your articles of association are a simple model template found online. Still, your business has grown exceptionally since the first draft, and you may wish to amend it to reflect your current company structure.
Similarly, you may try to anticipate future problems by using your constitution. This can help you save money on legal costs and avoid conflict in the long run. For example, you may have certain company members who are directors and shareholders. This can cause ambiguous situations where you will need clarification on whether the individual is acting in their capacity as a director or shareholder. To help avoid this ambiguity, you could amend your constitution to outline the decisions that can only be made by directors and those that shareholders can only make.
How Do I Amend my Company Constitution?
Once you decide to amend your company constitution, the next step is to check if there are any specific rules in your articles of association. If there are no specific provisions, you will need shareholders to agree to the change by way of a resolution.
A written resolution is preferable as it will avoid the hassle of organising a general meeting. However, suppose your company is more significant or you wish to have a more discursive process in the lead-up to a decision. In that case, you may wish to hold a vote at a general meeting where you invite your members to discuss the proposed changes.
Upon making the change, you will need to serve a copy of your special resolution alongside your amended articles of association to the Companies House within 15 days. Once you undertake this step, the process of amending your constitution will be complete.
Key Takeaways
As a company operating in the UK, you can amend your company constitution at some point. This can be for a variety of reasons. For example, you may be required to, or you might like to contain provisions that anticipate potential future problems in your company.
To amend your constitution, you will need to pass a special resolution. This will require a majority of at least 75% of the total votes that are cast and can be done either through a written resolution or at a general meeting. Once a vote has passed, you will need to provide a copy of your special resolution and your amended articles of association to the Companies House.
If you have any questions about amending your company’s constitution, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Articles of association are a company’s internal governing document, and they form part of the company’s constitution.
Companies House is the UK’s registrar of companies. They keep records of all companies operating in the UK.
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