What are Articles of Association and How Can They Be Altered?
The Articles of Association (AoA) are a crucial document for any company, outlining its structure, governance, and management. These articles are typically set out when a company is incorporated and serve as the company’s constitution. They define the rights and responsibilities of shareholders, directors, and the company itself. However, there may come a time when a company needs to alter its Articles of Association to adapt to changing circumstances or regulatory requirements. This article will discuss what Articles of Association are, why they may need to be altered, and the process for doing so.
Understanding Articles of Association
Articles of Association are a legally binding document that governs the internal management of a company. They set out the rules and regulations that the company must follow, including the rights and duties of shareholders, directors, and employees. The AoA also outlines how decisions are made, how meetings are conducted, and the procedures for the company’s dissolution.
The AoA can be divided into two main categories: Model Articles and Table A Articles. Model Articles are a standard set of articles provided by the government, while Table A Articles allow companies more flexibility to tailor their articles to their specific needs. The majority of companies in the UK adopt the Model Articles.
Why Alter Articles of Association?
There are several reasons why a company might need to alter its Articles of Association:
1. Legal Compliance: Changes in legislation may require the company to update its articles to remain compliant with the law.
2. Business Expansion: As a company grows, it may need to change its articles to reflect new structures or practices.
3. Company Reorganization: When a company undergoes a merger, acquisition, or restructuring, its articles may need to be altered to reflect the new entity.
4. Shareholder Requests: Shareholders may request changes to the articles to better align the company’s governance with their interests.
Process for Altering Articles of Association
To alter the Articles of Association, a company must follow a specific process:
1. Resolution: The board of directors must pass a resolution to alter the articles. This resolution must be proposed at a board meeting and passed by a majority vote.
2. Special Resolution: A special resolution is required to alter the articles. This resolution must be passed by a three-quarters majority at a general meeting of the company.
3. Notice: The company must give at least 14 days’ notice of the special resolution to its shareholders.
4. Filing: The altered articles must be filed with Companies House within 15 days of the special resolution being passed.
It is important to note that any changes to the Articles of Association must be consistent with the provisions of the Companies Act 2006 and other relevant legislation.
Conclusion
The Articles of Association are a fundamental document for any company, providing a framework for its governance and management. As a company evolves, it may need to alter its articles to adapt to new challenges and opportunities. By following the correct process, a company can ensure that its Articles of Association remain up-to-date and compliant with the law.
