Articles of Association in Company Law

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Articles of association are one of the most important but least understood documents in company law. I regularly speak to directors and shareholders who know their company has articles, but could not tell you what they say, when they apply, or why they matter. This is understandable, because articles often sit quietly in the background until something goes wrong, a dispute between shareholders, a director resignation, a share transfer, or a decision that someone challenges.

In simple terms, the articles of association are the rulebook for how a company operates internally. They govern how decisions are made, who has power to do what, how shares are issued or transferred, and how directors are appointed or removed. While they are rarely consulted day to day, they become critically important at key moments in a company’s life.

In this article I am going to explain what articles of association are, how they work under UK company law, what they usually contain, how standard and bespoke articles differ, and why understanding them can save a great deal of time, cost, and stress. I am writing this from the perspective of a chartered accountant who regularly deals with companies where articles suddenly become central to a dispute or transaction, and everything here reflects real world UK practice rather than theory.

What articles of association actually are

The articles of association are a legal document that forms part of a company’s constitution. Alongside the memorandum of association, they set out the internal rules that govern the company.

In practice, the articles:

• Define how the company is run
• Set out the rights and duties of directors
• Set out the rights of shareholders
• Control how shares are issued and transferred
• Govern meetings and voting
• Deal with decision making and authority

They are binding on the company, its directors, and its shareholders.

This means that everyone involved in the company is expected to follow the articles, even if they have never read them.

Why articles of association exist

Company law allows businesses to be owned and run by multiple people, often with different interests. Articles of association exist to create certainty and structure, so that everyone understands how the company operates and what happens when decisions need to be made.

Without articles:

• There would be no clear rules on authority
• Disputes would be harder to resolve
• Share ownership could become unclear
• Directors’ powers could be challenged

Articles provide a framework that keeps the company functioning smoothly, particularly when circumstances change.

Articles of association and UK company law

Under UK company law, every company must have articles of association. They are a mandatory part of incorporation.

When a company is formed:

• Articles are adopted automatically
• They become legally binding
• They apply from day one

If bespoke articles are not submitted on incorporation, the company will usually adopt standard model articles by default.

These model articles are provided by law as a starting point, particularly for smaller companies.

The legal status of articles of association

Articles of association have contractual effect. This is a crucial point that is often overlooked.

The articles form a contract between:

• The company and its shareholders
• The shareholders among themselves

This means shareholders can enforce the articles against the company and against each other, provided the matter relates to their rights as shareholders.

Directors are also bound by the articles in how they exercise their powers.

Articles of association versus shareholder agreements

Articles of association are often confused with shareholder agreements, but they are not the same thing.

Articles of association:

• Are public documents
• Are filed at Companies House
• Apply to all shareholders
• Are governed by company law

Shareholder agreements:

• Are private contracts
• Are not publicly filed
• Bind only the parties who sign
• Sit alongside the articles

In practice, many companies use both. The articles set the broad framework, while shareholder agreements deal with more detailed or sensitive arrangements.

What typically appears in articles of association

While articles can vary widely, most contain a core set of provisions that govern how the company operates.

Director appointment and removal

Articles usually set out:

• How directors are appointed
• Who has the power to appoint them
• How directors can be removed
• Whether shareholders or directors control appointments

This becomes very important in disputes or when a director resigns or is forced out.

Directors’ powers and decision making

Articles define what directors are allowed to do and how they make decisions.

This includes:

• Authority to manage the business
• Delegation of powers
• Board meeting procedures
• Voting rules at board level

In most companies, directors are given wide powers to run the business, but those powers come from the articles.

Shareholders’ rights and voting

Articles set out how shareholders exercise control.

This includes:

• Voting rights attached to shares
• How shareholder meetings are called
• How resolutions are passed
• Whether decisions require simple or special majorities

Understanding these rules is essential when significant decisions are being made.

Share capital and shares

Articles govern how shares work within the company.

They often cover:

• Different classes of shares
• Rights attached to each class
• Dividend rights
• Voting rights
• Capital rights on winding up

Without clear articles, share rights can become ambiguous.

Issue of new shares

Articles often control how new shares can be issued.

They may include:

• Director authority to issue shares
• Shareholder approval requirements
• Pre-emption rights
• Restrictions on allotment

These provisions protect existing shareholders from unwanted dilution.

Transfer of shares

One of the most important sections of the articles deals with transferring shares.

This may include:

• Director approval for transfers
• Restrictions on selling shares
• Pre-emption rights requiring shares to be offered to existing shareholders
• Rules around family transfers

Share transfer provisions are frequently relied on when ownership changes.

Dividends and distributions

Articles usually deal with how profits can be distributed.

They typically set out:

• Who declares dividends
• Whether dividends are discretionary
• How dividends are paid
• Whether different share classes receive different dividends

This is particularly relevant in owner managed companies.

Company meetings

Articles govern both board meetings and shareholder meetings.

They usually include:

• How meetings are called
• Notice periods
• Quorum requirements
• Voting procedures
• Use of written resolutions

These rules ensure decisions are properly authorised.

Administrative matters

Articles often include provisions covering:

• Company seals
• Record keeping
• Notices
• Electronic communication

These may seem minor, but they matter in practice.

Model articles of association

Most UK companies adopt model articles when they are incorporated, either intentionally or by default.

Model articles are standard templates designed to work for typical companies.

They are:

• Simple
• Widely understood
• Suitable for small companies
• Designed to comply with company law

For many single director or family companies, model articles are perfectly adequate.

Advantages of model articles

Model articles are popular because:

• They are easy to adopt
• They are familiar to advisers
• They reduce setup costs
• They avoid unnecessary complexity

For straightforward ownership structures, they usually work well.

Limitations of model articles

However, model articles are generic. They are not tailored to specific commercial arrangements.

Common limitations include:

• Limited protection for minority shareholders
• Basic share transfer rules
• No bespoke investor protections
• Limited exit provisions

As companies grow or ownership becomes more complex, bespoke articles are often required.

Bespoke articles of association

Bespoke articles are custom drafted documents designed to reflect the specific needs of a company and its shareholders.

They are commonly used where:

• There are multiple shareholders
• External investors are involved
• Different share classes exist
• Control arrangements are complex

Bespoke articles replace or amend the model articles.

Why companies adopt bespoke articles

Companies often adopt bespoke articles to:

• Protect minority shareholders
• Control who can own shares
• Set clear exit mechanisms
• Align company law with shareholder agreements

They provide certainty and reduce the scope for dispute.

Changing articles of association

Articles of association are not fixed forever. They can be changed, but there is a formal process.

To change the articles:

• A special resolution is required
• Shareholders must approve the change
• The updated articles must be filed

A special resolution usually requires at least 75 percent shareholder approval.

This high threshold reflects the importance of the articles.

When articles are commonly changed

In practice, articles are often changed when:

• New shareholders join
• Investors come in
• Share structures change
• A shareholder agreement is introduced
• The company matures

Failing to update articles at these points is a common mistake.

Articles of association and disputes

Articles are often relied on heavily in disputes.

Common dispute areas include:

• Director removal
• Share transfer refusals
• Dividend decisions
• Voting rights
• Deadlock situations

When disputes arise, the articles are usually the first document reviewed.

Articles and director duties

Directors must act within the powers given to them by the articles.

If a director acts outside those powers:

• Decisions can be challenged
• Transactions can be invalid
• Personal liability may arise

This is why directors should understand the limits of their authority.

Articles and Companies House

Articles of association are public documents and can be viewed at Companies House.

This means:

• Anyone can see the company’s rules
• Investors and lenders often review them
• Disputes can become more transparent

This public nature is one reason some arrangements are kept in shareholder agreements instead.

Common misunderstandings I see in practice

The most common issues I encounter include:

• Directors not knowing what their articles say
• Assuming articles do not matter day to day
• Believing shareholder agreements override articles automatically
• Failing to update articles after ownership changes

These misunderstandings often surface at the worst possible time.

Articles of association and small companies

In small owner managed companies, articles are often ignored because everything runs informally.

This usually works until:

• Someone wants to leave
• Someone wants to sell shares
• A disagreement arises
• A director resigns

At that point, the articles suddenly become very important.

Do sole director companies need to worry about articles

Even in single director companies, articles still matter.

They govern:

• Director authority
• Share issues
• Dividend decisions
• Future ownership changes

Ignoring them does not make them irrelevant.

Articles and tax planning

While articles are not tax documents, they can affect tax outcomes indirectly.

For example:

• Dividend rights depend on share classes
• Transfers may trigger tax events
• Buyback provisions affect tax treatment

Aligning articles with tax planning is important.

Professional advice and articles of association

Articles are legal documents, and changes should be made carefully.

Professional advice is particularly important when:

• Multiple shareholders are involved
• Investment is being raised
• Shares are being restructured
• Disputes are anticipated

Poorly drafted or outdated articles can be expensive to fix later.

Final thoughts

Articles of association are the foundation of a company’s internal governance. They are not just a formality completed at incorporation and forgotten. They define power, control, ownership, and decision making, and they become critically important when circumstances change.

Understanding what your articles say, and ensuring they reflect how your company actually operates, is one of the most sensible steps a director or shareholder can take. When articles are clear and appropriate, companies run more smoothly and disputes are easier to resolve. When they are ignored or outdated, even small issues can escalate into serious problems.

You may also find our guidance on what is company law and companies act 2006 helpful when dealing with related Companies House tasks. For a broader overview of filings, registers, and statutory duties, you can visit our companies house hub.