Articles of Association

The Articles of Association (often referred to as simply Articles) of a company are the instructions on how to run it.

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So, you are forming your new company, you have been waiting for this day for so long, you have perhaps been saving your pennies diligently to launch your business, and this company is your baby. No doubt you will have heard new parents complaining regularly that babies ‘don't come with an instruction manual'. Good news - companies do!

The Articles of Association (often referred to as simply Articles) of a company are the instructions on how to run it. If the instructions aren't followed, it will become unwell and once you've broken it, it's quite expensive to fix. Acting in breach of the Articles is an offence, and this is the reason it is so important to ensure that you have the right instruction manual for your company. Imagine if your baby came with an instruction manual for a puppy. At some point you would find yourself in all kinds of trouble!

Your Articles will detail things like:

  • How the directors will behave and how they will make decisions
  • Is liability limited - if so, how? By shares or guarantee?
  • If limited by shares, who controls the shares, what types of shares are there and who must be offered new shares
  • How dividends and profits will be dealt with
  • How general meetings will proceed and who is eligible to vote
  • What will happen if the company is wound up
  • Who controls the transfer of shares and to whom can shares be transferred to

This list is by no means exhaustive but hopefully demonstrates how important it is to get your Articles right at the beginning because only you know how best to raise your company. Your company is unique, your instruction manual should be too. If you find that you require additional Articles beyond those included as standard, Jordans offer a range of Optional Articles which can be included during the incorporation of your company.

Articles Description Fees
Pre-emption rights on share transfers Shares are offered to the other shareholders pro rata to their current shareholding £65 + VAT
Unrestricted transfer to family members Directors must register transfers of shares to family members: all other transfers are at directors' discretion £65 + VAT
Unrestricted transfer to family members: pre-emption on other transfers Directors must register transfers of shares to family members: all other transfers subject to pre-emption rights in favour of the other shareholders pro rata to their shareholdings £65 + VAT
Chairman's casting vote Gives a chairman who is already a shareholder a casting vote in the event of an equality of votes on any resolution at a general meeting £45 + VAT
Exclusion of the boards' power to authorise conflicts of interest Maintains the legal position before 1 October 2008 (ie. that a directors conflict of interest may only be authorised by resolution of the members) £45 + VAT
Enhanced voting rights for directors Gives a director who is also a shareholder additional votes per share if voting against a resolution to remove him as a director £45 + VAT
Associate Directors Enables the company to appoint associate directors who are given additional authority to that of an employee but who are not members of the board of directors, often used where the appointee is in contact with customers £45 + VAT

 

Jordans, along with leading Counsel, have developed a set of Articles which adopt the model articles but offer greater clarity and flexibility to small and medium businesses. We are always happy to discuss any additional custom drafting at the incorporation stage and forming your new company with bespoke articles can very often be more cost effective than adopting changes at a later date. Contact companyformation@jordans.co.uk for more information.

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