The Articles of Association (also known as Model Articles) is a legal document that detail a set of rules on how the company is governed. All private and public companies in the UK are legally required to have Articles of Association in place at the time they are incorporated.
The key aspects that Articles cover are:
- Directors’ powers, responsibilities, decision making, appointment and removal
- Shares, distribution of shares and dividends
- General meetings
- Voting rights
We have many clients who operate a private limited company and are the sole director and sole shareholder. This can pose a significant problem if the Articles of Association are not up to date following the death of the sole director shareholder which unfortunately we have seen over recent years.
If your company was incorporated under the Companies Act 1985, you will have most likely adopted Table A Articles. This would not have included any provisions for the death of a sole director shareholder. There would be lengthy legal process to resolve this and in the meantime the activities of the business would come to a halt, for example, the company bank account could not be accessed and assets could be frozen.
Companies incorporated under the Companies Act 2006 will have Model Articles and the personal representative of the deceased shareholder has the right to appoint a new director. The business can continue its activities.
If you are unsure whether your Articles are up to date or need help amending them, our team are well versed in this area.
Updating your Articles of Association can also be an opportunity to review and improve your company’s governance. This can help to ensure that your company is operating effectively, efficiently and can help to avoid potential disputes, conflicts or legal issues.