How to change your company’s articles of association
You can change your company’s articles of association at any time with the approval of 75% of members. As the governing document outlining the business’s purpose and rules, the articles often require updates at some point during the company’s lifespan.
Below, we outline the steps to make these changes, including obtaining member approval and notifying Companies House. We also explore common reasons why changing your articles may be necessary or advantageous for your business.
Making changes to your articles
The articles of association govern all aspects of a company’s internal operations, so they must align with the business’s evolving structure, objectives, and needs. Over time, updating these articles may become necessary.
Depending on the nature and scope of the required updates, this process might involve:
- Revising specific provisions in the current articles
- Adding, removing, or replacing certain clauses
- Drafting entirely new or customized articles of association
To implement any changes, the company’s members (shareholders or guarantors) must approve a special resolution. This can be done either through a written resolution or by voting at a general meeting.
- Does my company need articles of association?
- Understanding the Company Memorandum and Articles of Association
If you’re the sole director and member of a company, the process is simple since the decision rests solely with you. In all other scenarios, the resolution must receive approval from at least 75% of eligible members’ votes.
Passing a written resolution
The fastest and simplest way to change the articles of association is through a written resolution. This approach is favored by many companies as it eliminates the need to organize and attend a general meeting, which may not always be practical or convenient.
To pass a written resolution, follow these steps:
- Draft the Proposed Resolution
Prepare the special resolution along with a statement outlining how members can signify their agreement and the deadline for doing so. - Distribute the Resolution
Send the resolution and accompanying statement to all eligible voting members, either in hard copy or electronic form. You may choose to send individual copies to each member simultaneously or circulate a single copy sequentially. - Notify Companies House
After members approve the resolution, submit a signed copy of it and the updated articles of association to Companies House. Ensure this is done within 15 days of the resolution’s approval.
The new articles become effective immediately after the resolution is passed. Keep a copy of the resolution and the updated articles at your registered office. Additionally, consider sharing the revised articles with directors, members, and the company auditor, if applicable.
Passing a special resolution at a general meeting
A special resolution can also be passed during a general meeting of the company’s members, whether at a scheduled AGM or an extraordinary meeting specifically convened to approve the new articles.
This approach is ideal for companies with many shareholders or when the decision demands extensive prior discussion.
To pass a special resolution at a general meeting, follow these steps:
- Hold a Board Meeting
Convene a board meeting to discuss and prepare the proposed resolution. Agree on calling a general meeting. - Notify Members
Send notice of the general meeting to all eligible members at least 14 days in advance. Include details of the proposed resolution, an overview of the changes, and a copy of the new articles. - Present and Vote
Present the resolution to the members during the meeting. Allow time for discussion of the proposed changes, followed by a vote. - Submit to Companies House
After approval, send a signed copy of the special resolution along with the new articles to Companies House within 15 days of the meeting.
The new articles take effect immediately upon the resolution’s approval at the meeting. Companies House will update the central register of companies, making the documents publicly available online.
Notifying Companies House
As noted earlier, you must inform Companies House within 15 days of any changes to your articles of association. To comply, submit a copy of the resolution and the updated articles.
In certain situations, additional forms may be required:
- Form CC04 – If you are updating your company’s objects (purpose) in the articles.
- Form CC05 – If a change in the law necessitates alterations to the articles.
- Form CC06 – If the court or another authority has ordered the change.
You can submit these documents through the online document upload service or by mailing paper copies to Companies House in Cardiff, Edinburgh, or Belfast, depending on where your company is registered in the UK.
Are there any restrictions when changing the articles?
Companies have considerable flexibility with their articles of association, but there are specific rules and restrictions that must be observed.
- No provisions within the articles can override company law. Any changes you make must comply with the Companies Act 2006.
- To protect the rights of all members, particularly minority shareholders, any amendments or alterations must be in the best interests of the company as a whole. Changes that only benefit majority shareholders, or a particular class of member whilst being unfairly prejudicial toward the minority or a specific class, are unlikely to be enforceable.
- No member is bound by any alteration that is introduced after the date on which they become a member, if the alteration requires them to take more shares than they already have at that time, or if it increases their liability to contribute additional capital to the company. However, neither restriction applies if the member agrees in writing to be bound by the alteration.
- Whilst it is possible to attach conditions to future alterations to the articles (e.g. certain decisions require unanimous approval of members), you cannot introduce a provision that entirely prohibits members from making any future changes at all.
Although hiring a solicitor is not a legal requirement when creating or changing your company’s articles of association, it may be beneficial to ensure that this crucial governing document is both legally compliant and suitable for your needs.
Why would a company change its articles of association?
Companies may need to change their articles of association for various reasons. Some changes are necessary due to new laws, amendments to existing legislation, or orders from regulatory bodies or the courts (such as the Charity Commission). However, more often than not, companies update their articles because the current version is either unclear or no longer suitable due to changes within the business.
Here are some common reasons companies may decide to change their articles of association:
Shareholders’ Rights
Clarifying or enhancing shareholder rights is often the primary reason to update a company’s articles of association. Key areas to consider include:
- Pre-emption rights
- Drag-along and tag-along rights
- Transmission of shares (automatic transfer) in specific situations, such as the death of a shareholder
- Voting and dividend rights attached to shares
- Policy for declaring and distributing dividends
- Decision-making rules and procedures, including reserved matters
- Restrictions on share allotments and transfers
- Share buyback clauses
- Restrictive covenants
Ideally, all matters related to shareholders should be included in a shareholders’ agreement. While this document is optional and supplementary to the articles, there should be no conflict between the two. If you make changes to the company’s articles, ensure you also update any existing shareholders’ agreements accordingly.
Membership Criteria
Companies often seek control over who can and cannot hold shares. Some may set age requirements, limit membership to certain groups, or specify that only individuals with certain qualifications or affiliations are eligible to become members.
Appointment of Directors
There are few statutory restrictions on appointing directors, but companies may choose to define specific rules in their articles. For example, you may decide whether existing directors should be allowed to appoint new directors without shareholder approval, or if directorship should be limited to members or people with specific qualifications. Some companies also limit the number of directors allowed at any time.
Directors’ Powers
The Model articles give directors significant power over day-to-day management, with limited input from shareholders who are not directors. To address this, some companies alter their articles to restrict directors’ powers, requiring shareholder consent for certain decisions, such as issuing new shares or approving share transfers.
Issuing Different Share Classes
The Model articles are designed for companies with ordinary shares of equal value. If you want to issue other types of shares or create multiple share classes, you will need to change the articles to reflect this.
Authorised Share Capital
Some companies prefer to limit the amount of shares they can issue, often by setting a fixed amount, such as £100, divided into 100 shares with a nominal value of £1 each. This limitation is known as ‘authorised share capital’. Before 2009, limited companies were required to specify their authorised share capital in their memorandum of association. While this is no longer a requirement, some companies still choose to include a maximum amount of share capital in their articles to prevent excessive dilution of existing shares.
Dispute resolution
Shareholder disputes are common, but the Model articles offer limited guidance on handling them. To address potential conflicts efficiently, it’s crucial to incorporate a clear dispute resolution procedure within the articles.
Company meetings
Although private companies are not legally required to hold board or general meetings, doing so offers significant benefits. Therefore, you may want to change your company’s articles to specify regular meeting intervals, such as quarterly or at the end of each financial year.
Review your articles of association regularly
Directors and members should regularly review their company’s articles of association to ensure they remain suitable and up-to-date. Outdated or inappropriate articles can lead to unnecessary obstacles, decision-making challenges, and shareholder disputes, all of which can hinder the company’s success.
Do you have any other questions?
In this article, we covered how to change your company’s articles of association, the necessary approval process, and common reasons for making changes. It’s crucial for maintaining the company’s legal compliance and supporting its growth. If you’re planning changes, ensure they align with your company’s needs and the legal framework.
For more information, visit the Startxpress Help Center and the Startxpress Blog. If you have any questions, feel free to reach out to us at support@startxpress.io!
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