What Are ‘Articles Of Association’?

The articles will specify, for instance, how the company is managed, how company meetings are to be held and how decisions are made by directors and shareholders. They will also say what the responsibilities and powers of the directors are. Accordingly, they are one of the main means by which the shareholders exert control over the board of directors.Most companies incorporated via the Companies House website are automatically given a standard set of articles called ‘Model Articles’. However these can tailored pre-incorporation so that they suit a particular company’s needs. Companies may also have their own bespoke articles, where the constitution is created especially for the company. Bespoke articles may set out, for instance, the number of directors – the default position is one, but this may not suit some companies, and so they can change that aspect of the Model Articles. They might also say that only the holders of certain classes of share may appoint directors, receive dividends or vote at meetings.

One of the duties of a company director is to follow the company’s constitution, including the articles. If you are managing the business of a company, you need to be sure that you are acting within the powers conferred by the articles and following and processes or other formalities laid down. If not, and you take an action in breach of the articles, then the shareholders can take legal against you. A breach of the articles might occur if, for instance, the directors appoint new directors who are not eligible under the articles. Where the breach is inadvertent, the company can in some circumstances ratify the decision.

Notes

For more information about disputes within businesses, click here.