Company Articles and Company Constitution

Roger Mason

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4 hours		 This report, and passing the online assessment that accompanies it, qualifies for 4 hours under the Solicitors Regulation Authority Continuing Professional Development scheme. See the CPD tab below for details.

Overview

All companies have articles and all companies have a constitution.

It is compulsory that a company has articles and the Registrar will not register
a company unless it has. The articles are the rulebook for the internal management of the company’s affairs. They are the regulations for governing the company and set rules for such matters as the relationship between the members, the rights attached to different classes of share and the way that the members make decisions. This new Report highlights numerous legislative situations which can effect your business and which are not common knowledge to many company secretaries and directors.

Who should read this Report?

  • Company secretaries
  • Company directors
  • Anyone working directly for company secretaries and company directors
  • Accountants, lawyers and consultants

Content

1. The evolution of company articles and the company constitution
  • Introduction
  • Companies prior to 1844
  • Company registration and the Joint Stock Companies Acts of 1844 and 1856
  • Limited liability
  • Evolution from 1856 to 1985
  • The Companies Act 2006
  • The number and types of companies
  • Development of the constitution and articles
  • The 1856 and 2006 model articles compared

2. The constitution

  • Introduction
  • Definition of a company’s constitution
  • Resolutions and agreements that are part of the constitution
  • Registration of resolutions and agreements
  • Resolutions and agreements to accompany all copies of the articles

3. The new-style memorandum and the old-style memorandum
Introduction

  • The new-style memorandum
  • The old-style memorandum
  • Companies registered before 1st October 2009
  • Changes to the memorandum
  • Company name
  • Domicile
  • Objects clause
  • Authorised share capital
  • Limited liability
  • Public company clause
  • Entrenched provisions

4. Articles

  • Introduction
  • The compulsion to have articles
  • The required form of the articles
  • The articles as a contract
  • The purpose of articles
  • The three options concerning articles
  • Model articles
  • Model articles as the default provision
  • The relationship between articles and statutory law
  • The relationship between articles and shareholder agreements
  • Authorised share capital
  • Objects
  • The requirement to provide copies of the articles
  • Articles and the Interpretation Act
  • The latest model articles in context
  • Changing the articles and entrenchment of articles

5 Considerations when changing the articles

  • Introduction
  • Dangers to be avoided

Members’ meetings and written resolutions
  • Annual general meetings
  • Notice period for general meetings
  • Short notice of meetings
  • Notice period for a special resolution
  • Proxies
  • Quorum at a members’ meeting
  • Voting on a show of hands and polls
  • Chairman of a general meeting and the chairman’s casting vote
  • Written resolutions of the members

Directors
  • Directors’ meetings
  • Alternate directors
  • Minimum and maximum number of directors
  • Removal and termination of directors
  • Retirement of directors by rotation
  • Chairman of directors’ meetings and the chairman’s casting vote
  • Directors’ duty to avoid conflicts of interest (CA2006 section 175)
  • Directors’ duty to declare interest in proposed transaction or arrangement * (CA2006 section 177)
  • Directors’ indemnity

Share capital and shares
  • Authorised share capital
  • Partly paid shares
  • Allotment of shares
  • Purchase of own shares
  • Redeemable shares
  • Transfer of shares

Other matters
  • Provision for the death of all the directors and members
  • Age and other discrimination
  • Objects
  • Electronic and website communication with members
  • Failure to notify contact details

6. How articles and the company name are changed

  • Introduction
  • A piece of advice
  • Another piece of advice
  • The way that articles are changed
  • Considerations for listed companies
  • Variation in class rights
  • Change of company name
  • Example of special resolution to alter articles
  • Example of special resolution to adopt new articles
  • Example of special resolution for change of name of company
  • Example of written special resolution to alter articles
  • Example of certified copy of written special resolution for Companies House

7. Review of model articles for private companies

  • Introduction
  • Liability of members (Article 2)
  • Directors’ powers and responsibilities (Articles 3-6)
  • Decision making by directors (Articles 7-16)
  • Appointment of directors (Articles 17-20)
  • Shares (Articles 21-29)
  • Dividends and other distributions (Articles 30-35)
  • Capitalisation of profits (Article 36)
  • Organisation of general meetings (Articles 37-41)
  • Voting at general meetings (Articles 42-47)
  • Administrative arrangements (Articles 48-51)
  • Directors’ indemnity and insurance (Articles 52-53)
  • Model articles for private companies limited by guarantee

8. Review of model articles for public companies

  • Introduction
  • Liability of members (Article 2)
  • Directors’ powers and responsibilities (Articles 3-6)
  • Decision-making by directors (Articles 7-19)
  • Appointment of directors (Articles 20-24)
  • Alternate directors (Articles 25-27)
  • Organisation of general meetings (Articles 28-33)
  • Voting at general meetings (Articles 34-40)
  • Restrictions on members’ rights (Article 41)
  • Application of rules to class meetings (Article 42)
  • Issue of shares (Articles 43-44)
  • Interests in shares (Article 45)
  • Share certificates (Articles 46-49)
  • Shares not held in certificated form (Articles 50-51)
  • Partly paid shares (Articles 52-62)
  • Transfer and transmission of shares (Articles 63-68)
  • Consolidation of shares (Article 69)
  • Distributions (Articles 70-77)
  • Capitalisation of profits (Article 78)
  • Communications (Articles 79-80)
  • Administrative arrangements (Articles 81-84)
  • Directors’ indemnity and insurance (Articles 85-86)

Appendices

Appendix A

  • Cross-referencing of model articles for private companies limited by shares with the 1985 table A

Appendix B
  • Cross-referencing of 1985 table A with model articles for private companies limited by shares

Appendix C
  • Table A to the Companies Act 1985 as amended by SI 2007/2541 and SI 2007/2826

Appendix D
  • Table C to the Companies Act 1985 as amended by SI 2007/2541 and SI 2007/2826

Appendix E
  • Model articles for private companies limited by shares

Appendix F
  • Model articles for private companies limited by guarantee

Appendix G
  • Model articles for public companies

The author

Roger Mason is a Chartered Secretary and a Chartered Certified Accountant, and a very experienced finance director and company secretary. His career has included periods with the Ford Motor Company and ITC Entertainment Ltd, as well as 14 years as Financial Director and Company Secretary of a leading greetings card company.

Roger now presents seminars on company law, the duties of directors, the duties of company secretaries and on financial topics. He has written 16 books. His books for Thorogood include The Company Secretary’s Desktop Guide
(now in its fifth edition), 501 Questions and Answers for Company Directors and Company Secretaries (now in its second edition) and The Complete Guide to Debt Recovery.

CPD

Thorogood legal reports are accredited by The Solicitors Regulation Authority (CPD reference DVQ/THPU) for continuing professional development as distance learning education.

NB: Solicitors may claim up to 75% (12 hours) of their annual CPD requirement by undertaking distance learning education.

For more information see The Solicitors Regulation Authority

 

Certificate of completion

Upon reading this publication participants are invited to undertake a final assessment in the form of an on-line multiple choice paper. Upon passing, a certificate of completion will be made available to you, which can be included as part of your CPD requirements should you consider it relevant to your professional development needs.