When you set up a limited company in the UK there are lots of bits of paperwork to deal with. One of the most important is the articles of association. These are the rules by which your company will run. They determine things like how directors are appointed, how much they get paid and how decisions are made about the future of the business. The articles also cover issues around shares including how they can be sold and the way in which dividends can be distributed. If any disputes arise between directors or shareholders of the company then it is the articles of association which determines how the problem can be resolved.
It is a key feature of UK company law that you can write your company’s articles of association to suit your business. You can specify what kind of business your company can engage in, how the profits will be distributed, who can join the company and how. Because the articles of association play such a fundamental role in the running of a company, and because they can be unique to each company, it is essential you know what yours are.
Creating Articles of Association
When you set up a company through Companies House they will supply your company with the model articles of association as specified in the 2008 Companies Regulations. If this is what your company has then you need to have read them and have a basic understanding of the implications for your business. If you decide that the model articles don’t suit your business then you can create your own. This needs to be done with some care. If you miss something out then the model articles will be used to fill the gap. This means that you could end up relying on the standard model articles which you were trying to avoid.
If you are going to go down the route of creating your own articles of association then it is worth seeking professional legal advice. Because this document is likely to play a role in adjudicating any disputes within the company it is worth making sure it will stand up to legal scrutiny.
Model Articles of Association
As well as the standard models of association for private companies limited by shares there are also model articles available for other forms of companies. The 2008 Companies Regulations has generic ones but more specialist model articles are available. Model articles of association are available for charities, Community Interest Companies and sports clubs.
As with the generic model articles, or bespoke ones, reading and understanding these articles is important. You will struggle to run your company in accordance with the articles if you don’t know what they say.