Many founders of start-ups focus on growth rather than legal details. That’s understandable. However, understanding your company’s legal structure, especially its articles of association, is crucial. These articles define how your business operates and impact everything from decision-making to investment potential.
When you launched your business, your lawyer or accountant probably took care of the details and set up a limited company to protect your assets against losses. So, what more do you need to know about owning a company?
We’d say a great deal. If you’re new to entrepreneurship and company ownership or have invested in a company as a shareholder, we strongly recommend you get on top of the legals and seek expert corporate legal advice, in particular, understanding your articles of association.
The contents of the articles can have a major impact on your ability to attract finance. New investors will be extremely interested in them because their terms can affect the value of their investment and their ability to realise the value of their shares.
Please note, if you’re a sole director company started with the model articles for private companies adopted without amendments, you need to act now due to the potential impact of a recent court case. Find out more about what you need to do in our update for sole directors.
Read on to find out more about articles of association.
Jump to:
- What are articles of association?
- Why do you need articles of association?
- When should I amend the articles?
- What do you need to include in the articles of association?
- Where can you find a company’s articles of association?
- What are the key terms in the articles of association?
- What are the ‘model’ articles and when shouldn’t I use them?
- How are shareholders' agreements different from articles of association, and why might I want one?
- What articles of association are used for holding companies and joint ventures?
- Can I change my company’s articles and if so, how?
- Can articles of association override the law?
What are articles of association?
Articles are a company’s legal framework, governing how it is run. They represent a contract between the shareholders of a company and the company itself, as a legal entity. Directors must adhere to them, even though they don’t sign them. Together with a company’s certificate of incorporation, they make up the company constitution and are registered at Companies House.
Articles cover vital areas, including:
- Director roles – Appointment, decision-making, powers, and responsibilities.
- Share structure – Types, classes, transfers, and dividend policies.
- Shareholder rights – Voting rights, quorum for meetings, and decision-making processes like veto rights
- Administrative rules – How official documents and notices are handled.
Why do you need articles of association?
Under UK law, all companies must have articles of association. Many start-ups begin with model articles, the government’s standard template. While these provide a solid foundation, they may not always be suitable as a business evolves. Companies can amend their articles to reflect specific needs.
Articles are particularly important for attracting investment. Investors closely examine them to assess voting rights, dividend structures, and how they can exit the company. Weak or unclear provisions could deter funding.
When should I amend the articles?
If your business structure changes, your articles should reflect that. You might need amendments if you:
- Plan to issue multiple share classes.
- Need alternate directors or a company secretary.
- Want to allow virtual shareholder meetings.
- Need special rules for transferring shares within family members or a specific group.
Changing articles requires shareholder approval via a special resolution (75% majority). The updated articles must be filed with Companies House within 15 days, or directors may face fines.
What do you need to include in the articles of association?
The Articles cover the following key areas:
- Shareholder liability: owners of a limited company have restricted exposure to any financial losses incurred by the company. This is usually £1 per share or per guarantor.
- Directors: the number of directors, their appointment, the director decision-making process and their powers and responsibilities.
- Shares: the number of shares, types and classes of shares, rights attaching to the shares, the allotment and transfer of shares and the payment of dividends. S
- Shareholders: the decision-making process for shareholders, how many need to be present before a meeting can be valid (the quorum) and the voting process.
- Other administrative arrangements: how notices and documents should be communicated by the company.
Our corporate solicitors can provide legal advice on drafting or amending your articles of association and other constitutional documents.
Where can you find a company’s articles of association?
You can find a company’s articles of association at Companies House as these are, by law, public documents open for inspection. As an example, take a look at Tesco PLC’s original Articles and subsequent amendments.
A copy of the company’s articles should also be kept at its registered office.
What are the key terms in the articles of association?
Classes of shares
A company may decide to issue different types of shares (for example, ordinary shares and preference shares) and different classes of each type of share, for example, A ordinary shares and B ordinary shares, often known as alphabet shares.
Different share classes allow a company to allocate different rights to different shareholders. These should be set out clearly in the articles.
The shareholders’ rights section of the articles generally covers the following:
- Entitlement to dividends: how dividends are apportioned between the shareholders
- Entitlement to vote: how the voting rights are weighted between the shareholders
- Entitlement to capital on a winding up or disposal: how certain classes of shares may rank higher in priority when it comes to claims
- Pre-emption rights: whether existing shareholders have the right of first refusal before new shares can be offered to third parties
Allotment of shares
Any restrictions or conditions on the allotment or issue of shares should be contained in the articles.
Usually, companies with only one share class can automatically allot shares provided there is no restriction in the articles. All other companies will need to obtain authority to allot shares in their articles.
Pre-emption rights
Even if the directors can allot shares, they still must check whether any pre-emption rights apply before they do so. If the shares are issued for cash, unless the articles say otherwise, they must first be offered to the other shareholders.
Members’ reserve power
Some articles (including the model articles) include a reserve power under which the shareholders can force or prevent a decision of the directors by passing a special resolution.
Transfer of shares
The articles may restrict a shareholder’s ability to transfer shares. Directors can’t refuse to register a transfer unless the articles give them this power.
Some articles may contain a special power allowing shares to be transferred freely to certain categories of people, for example, family members or other shareholders of the company.
Shareholders’ decision making
Shareholders usually make decisions by written resolution or in a general meeting. The articles set out the key rules and processes for a general meeting such as notice requirements, voting and attendance rights, quorum and adjournment.
What are the ‘model’ articles and when shouldn’t I use them?
Model articles provide a simple framework, but they may not suit all businesses. You may need amendments or a bespoke set of articles if:
- You require different share classes with unique rights.
- You want to introduce director-specific rules like alternate directors
- You plan to hold virtual shareholder meetings.
- You need pre-emption rights to protect existing shareholders.
- You want to have a company secretary
Even if the model articles are suitable, sometimes company owners choose to remove certain provisions, for example to:
- allow board meetings to be quorate when there’s just one director
- remove the right of the chairman to have a casting vote
- to allow directors to vote if they have a conflict of interest
If you don’t want to use the model articles at all, you or your advisor will need to draft bespoke articles that are tailored to your company’s needs.
How are shareholders' agreements different from articles of association, and why might I want one?
Unlike articles, a shareholders’ agreement is optional but can offer additional protections. It is a private contract between shareholders that can:
- Set dispute resolution procedures.
- Protect minority shareholders.
- Control share transfers and exit strategies.
- Define dividend policies.
- Outline shareholder obligations and responsibilities.
Because articles are public, some companies prefer to outline sensitive matters in a shareholders’ agreement instead.
Here are some of the main reasons to have a shareholders’ agreement in addition to your articles:
- It’s simpler to sort out shareholder disputes if you’ve agreed on a set procedure for resolving disputes in a shareholders’ agreement.
- A shareholders’ agreement can provide that certain director decisions must be approved by the shareholders too.
- A shareholders’ agreement can protect the rights of minority shareholders. For example, a minority shareholder may be given the right to sell their shares at the same time as the majority when the company is sold. Or majority shareholders may want to force the minority to sell their shares to a buyer if they receive a good offer for sale of the company.
- Shareholders’ agreements often give a right of pre-emption to existing shareholders where new shares are issued, or shares are transferred. This gives them in essence a right of first refusal, so they’re not forced to accept outsiders into their business.
- Shareholders’ agreements can provide for what happens if a shareholder dies or becomes incapacitated through illness,
- Shareholders’ agreements can be used alongside employment or service contracts to link shares to employment, or to restrict shareholders from setting up competing businesses
- Having a shareholders’ agreement is a good way to demonstrate to potential investors that your business is stable and credible,
- You can expand on your dividend policy in your shareholders’ agreement.
What articles of association are used for holding companies and joint ventures?
Holding companies (parent entities controlling subsidiaries) often require bespoke articles to reflect their specific governance needs. Similarly, joint venture (JV) companies, formed by two or more businesses for a shared project, need tailored articles covering voting rights, dispute resolution, and shareholder exits.
You wouldn’t normally use model articles to run a JV company but develop a bespoke set to deal with disputes, deadlock, different classes of shares and how shares can be transferred.
Can I change my company’s articles and if so, how?
Companies grow and change, and it might be that once you’ve been in business for a while your articles are no longer suitable.
If a company decides to amend its articles, it must follow a formal process:
- Board Proposal – Directors propose changes and circulate the new draft to shareholders.
- Special Resolution – A 75% majority of shareholders must approve the amendments.
- Filing with Companies House – The updated articles and a copy of the special resolution must be submitted within 15 days.
Failure to meet this deadline could result in fines, though the articles will still be valid.
Can articles of association override the law?
Articles must comply with the Companies Act 2006. Any conflicting provisions will be overridden by law. Companies formed before October 2009 should review their articles to ensure they align with current regulations.
If you’d like to know more about articles of association, would like help drafting a bespoke set of articles or would like further information about starting a company or putting in place a shareholders’ agreement, contact our team of expert corporate lawyers. Get in touch on 0800 689 1700, email us at enquiries@harperjames.co.uk, or fill out the short form below with your enquiry.
