Every company formed in England and Wales is legally required to have articles of association at the time of incorporation. The articles of association govern the relationship between a company and its shareholders.

What has changed?

A recent decision of the High Court has ruled that the Model Articles used by many Private Companies are not suitable for companies with a sole director. Companies with sole directors will need to:

1. review their articles of association to make sure a sole director is empowered to run the company;

2. review their articles of association to make sure any decisions the sole director has previously made and will make are valid and not void as a result of this ruling (which applies retrospectively); and

3. consider if any of their previous decisions need to be confirmed/ratified.

Where are my company’s articles of association?

There are several sets of Model Articles, which are prescribed in law for the different types of companies. When you incorporate your company, there is a tick box to use Model Articles, and after you tick that box, the relevant set of Model Articles is applied to your company and referenced on Companies House, even though you may not even have a copy yourself.

What do the Model Articles say?

We go into that topic in more detail in our article on why your Model Articles need to be changed, but it’s more a case of what they don’t say. The Model Articles, particularly for private companies, provide the bare minimum in terms of shareholder protections.

I’m a sole director with Model Articles. What do I need to do?

If you’re a private sole director company with the Model Articles for Private Companies adopted (without amendments), you need to:

1. Amend your articles to allow you, the sole director, to validly make decisions in respect of the company; and

2. assess if any past decisions need ratifying.

Do I need bespoke articles drafted?

Getting bespoke articles of association created for your company is now more important than ever in light of this recent High Court ruling.

Having a bespoke set of articles which are practical and align with your company and its relationship with its shareholders will help to prevent costly problems in the future. It doesn’t matter whether you are a small company with two shareholders or a large company with many, having bespoke articles of association in place can save you time and money in the future.

Whether you’re an ambitious start-up, or operate an established company, Harper James are able to amend or draft bespoke articles. If you’d like to know more about articles of association, need help amending your Model Articles, drafting a bespoke set or would like further information about starting a company, contact Harper James’ team of expert corporate lawyers.