Changing the Articles of Association

The articles of association are a legal document every company needs from the moment of their incorporation. The articles dictate how a company should be governed, and the powers directors/company officers have. In a previous article, we looked at what the articles are, and what they usually contain, but this article we are going to have a look at how one can go about editing the articles of association, under Section 31 of the Companies Act 2006.

The need for change

Naturally, a company’s articles of association are not documents set-in-stone; they have the ability to evolve as the company moves forward. Overtime, your business will change and company officers may be reshuffled as well, and so such an important document - that sets out the aims of the company – needs to be able to be edited.

You may be looking to update your articles of association if, overtime, certain clauses have become redundant or applied to the business when it was a lot smaller. The articles of association should complement your company and reflect its economic position.

Restrictions

Several restrictions are placed upon how you can edit the articles of association. The following are the primary limitations you may encounter:

  • Every change you wish to make to your company’s article of associations must reflect the interests of every company member; usually any resolutions need at least 75% of members to agree before they are passed.
  • With the previous point in mind, additions to the articles, however, cannot be used by a majority to discriminate a minority. For example, company members may not subscribe to clauses that inflict on the ability of shareholders to have a say in the operation of a limited company.
  • Any change made to the articles of association that will have a retrospective affect (an effect on something that has already happened) must be carefully considered to note that they are both legal and fair.
  • You cannot change any clause in the article of association that makes the article more difficult to edit in future.
  • Any alteration to the articles that have the effect of converting a private limited company to a public limited company, or vice versa, are not acceptable until a special resolution has been passed to convert the format of the company first.
  • Changes made to the articles of association that limit a member’s voting power are also prohibited.
  • A public limited company (plc) has further limitations placed upon it, you can read more about plcs in this Smarta guide.

Although it may not be a legal obligation of your company, it is suggested that any changes to any clauses in the articles of association are first run past shareholders.

Amendments

Amendments to your company’s articles of association can be conducted in a myriad of ways:

  • Changing the wording of one or more clauses in the existing articles;
  • Adding entirely new articles to the register;
  • Adopting a number of new clauses to a pre-existing set of articles.

Unless a business only has one company officer, who is the holder of all shares, any change made to the articles of association must be conducted via a special resolution, which should have at least 75% of company members in agreement of the alteration. 

If only a few shareholders own the company, then amendments are most easily made through a written resolution, which avoids the need for a general meeting to be called. Each shareholder should sign the amended articles and a certified copy must be sent to Companies House.

If a company has lots of shareholders, then a special resolution must be passed during a general meeting. First a board meeting must be held by the directors in which the reasons for changes to the articles are described to shareholders - shareholders may question company officers at this time. Following this, a general meeting should be held where 75% (at least) of company members should agree to the alterations. The special resolution is then sent to Companies House, and no more than 15-days later, a certified copy of the amended articles must also be sent.

Whatever method is taken, the new articles of association are thought be in effect once the special resolution has been passed and approved.

Smarta Formations

Now you know how to amend one of the main business document, why don’t you incorporate your own limited company with Smarta today.

We offer a company registration service powered by the National Business Register.  You can search for available names then register a business name, or set up a company and/or register a trademark with us. You will receive a professional binder with all your official documents via post within 3-days.

Smarta Formations is the quickest and easiest way for you to register your limited company. All the hard work is handled for you. 

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