Model Articles of Association For Limited Companies

Introduction About Model Articles of Association

Model articles are the most commonly used articles by corporations in the United Kingdom, as these articles are applied by default to all corporations, except if the business selects to accept other articles. Model articles are consistent for all organisations and by default can be used by an organisation – these article of association are approved by the Companies Act 2006 . It is mandatory for all limited companies, in the United Kingdom, to have an article of association. These articles define the rules which must be followed by company officers while operating their businesses. In accordance with section 20 Companies Act 2006, model articles will be completely applied to an organisation if it doesn’t take on any other articles. Also, if an organisation adopts tailored articles which don’t disregard or amend the pertinent model articles, then the relevant model articles will form part of a corporation’s articles of association

Also Read: Change Article of Association After Incorporation

Since their introduction, a few alterations have been made to the model articles. The most recent model articles apply, by default, to all public and private limited corporations incorporated on or post 28-Apr-13.

Below Mentioned are the Versions Available for Each of the 3 Limited Company Types:

1. Model articles for private companies limited by shares
2. Model articles for public companies
3. Model articles for private companies limited by guarantee

Summary of the foremost necessities encompassed in the Model Articles for private companies limited by shares which are covered in schedule 1 of the corporations regulations 2008 are:

• Shareholders’ Reserve Authority (Article 4)

  Through a special purpose (i.e. a resolution calling for 75% or additional votes in favour) the stockholders may guide the directors to refrain from or take any detailed action

• Director’s strength – number of Directors with an organisation (Articles 7)

  There are no maximum or minimum number of directors according to the Model articles. If an organisation has only one director, then in such a scenario he/she can take the necessary decisions irrespective of the requirements of the articles concerning to decision-making by directors’ of an organisation

• How do Directors make decisions (Articles 7-8)

  The common rule with regards to decision making, as per the Model Articles, is that judgements need to be taken unanimously or through majority members arriving at a decision during a director’s meeting. It is imperative to note that majority decisions should be made at an appropriately held directors’ meeting

• Board meeting or meeting of Directors (Articles 9-13)

  Any of the directors or a company secretary can call for a meeting of directors’ by giving notice to all the other directors within an organisation.

  A directors’ meeting will be authentically held if:

  • The meeting has been addressed and takes place according to the articles
  • Each director can converse freely with the others about any data or thoughts they have on any specific element of the business

  Due to availability of cloud-based telecommunication systems, if a meeting is held through video-conference or teleconference then such a meeting will be accurately held if it meets the other applicable requirements

• Conflict of Interest (Article 14)

  According to Article 14 of the Model Articles, if one director is interested in a suggested transaction then his/her vote shall not be considered in this matter unless:

  • The shareholders have misapplied the pertinent provision in the articles
  • The director’s interest cannot rationally be considered, as likely, to raise any conflict of interest

  According to section 175 Companies Act 2006, a director should avoid any circumstances in which he/she can have or has, an indirect or direct interest that clashes, or probably may conflict with the welfare of an organisation

• Appointment of Directors (Article 17)

  A new director may be chosen by decision of the directors or by an ordinary resolution of the stakeholders

• Shares (Articles 21-29)

  Model articles only makes available the issue of ordinary shares, however, they do authorise shares of various classes to be issued with such privileges or limitations as may be determined by a conventional resolution or the stakeholders

• Dividends and other distributions (Articles 30-36)

  Ultimate dividend must be first suggested by the directors and then approved by an ordinary resolution of the stakeholders. A pro-tem dividend may be paid subsequent to the decision of the directors

• Organisation of General Meetings (Articles 37-41)

  Under the Companies Act 2006, holding an annual general meeting (AGM) is no longer necessary and the Model articles do not encompass any requirements concerning to AGMs. The notice provisions relating to general meetings are covered under the Companies Act 2006 and not the Model articles. An organisation’s directors may make whatsoever provisions they think to be suitable to empower those appearing in a general meeting to exercise their privilege to speak or vote at it. The Model articles are drafted to enable people to vote even through attendance by phone or video link

• Voting at General Meetings (Articles 42-46)

  A poll may be demanded by the following:

  • The directors
  • The chairman of the meeting
  • An individual or individuals representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution
  • Two or more individuals having the right to vote on the resolution

  Shareholders may deliver substitute notices in respect of their shares but they will only be effective if they:

  • State the address and name the shareholder assigning the proxy
  • Recognise the individual selected to be that stakeholder’s proxy and the general meeting in regards to which a person is selected
  • Are signed by or on behalf of the stakeholder assigning the proxy, or are legitimate in such manner as the directors may determine

• Administrative arrangements (Articles 48-51)

  The Model articles allows any type of communication under Companies Act 2006 which consists of communication via a website or an email. There is no necessity for a corporation to have a firm seal however, if it does, then the Model articles empowers the directors on how to use it. All communications must be carried out in a secure and authentic manner, thereby, keeping the organisational data and user data protected. With General Data Protection Regulation (GDPR) implemented on 25 May 2018, it becomes imperative to protect and secure individual data

• Directors’ indemnity and insurance (Articles 52-53)

  According to the Model articles, the appropriate responsibilities that can be indemnified are:

  • Any additional liability incurred by a director as an officer of the corporation or an associated corporation
  • Any liability sustained by a director due to any carelessness, default, breach of duty or breach of faith in relation to the corporation or an associated corporation

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.