Understanding the Crucial Role of Articles of Association and Shareholders’ Agreements in UK Companies

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by Martin Kingman 
| 13 December 2023
Whether you’ve recently set up a company or did so in the past, two essential documents play a vital role in its operation: the Articles of Association and the Memorandum of Association. Understanding these documents is crucial for every company director and shareholder.

Articles of Association: The Company’s Rulebook

The Articles of Association are foundational to the functioning of your company, acting as its rulebook. They are a binding agreement between the shareholders and the company, created under The Companies Act 2006. These Articles govern various aspects, including the rights and responsibilities of shareholders, the distribution of profits, and the administration of the company.

The Memorandum of Association: Establishing the Company’s Identity

The Memorandum of Association complements the Articles. It is essential for forming a Limited Company, detailing the company’s name, date of incorporation, and information about the original subscribers (the initial shareholders). It also specifies the number of shares each subscriber holds and whether the company is limited by shares or guarantee.

Model Articles and Customisation

Since 2009, The Companies Act 2006 has offered model articles known as ‘Table A’. New companies can adopt these model articles instead of crafting their own from scratch. While these model articles are comprehensive, they may not meet your company’s unique needs. Amending them to suit the specific requirements of your business is often necessary, especially as your company grows and evolves.

Beyond Articles: The Importance of Shareholders’ Agreements

While the Articles of Association are fundamental, they are often supplemented with a Shareholders’ Agreement, especially in more complex scenarios. This private agreement among shareholders outlines their respective interests and is crucial for regulating their relationship. It’s invaluable for resolving disputes, such as those concerning share transfers, and is not part of the public record.
Your company’s Articles of Association and Shareholders’ Agreement are key to its smooth operation. They should be regularly reviewed and updated to reflect the current state and needs of your business.

Need Professional Assistance?

If your company’s Articles of Association or Shareholders’ Agreement needs reviewing, or if you need to establish a Shareholders’ Agreement, PLC Group is here to help. Our expert team can assist in preparing and implementing these documents to prevent conflicts and ensure your company’s stability and growth.  Click here to find out more.

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