Business, Legal & Accounting Glossary
Document setting out the relative rights of shareholders in a limited liability company.
Articles of association are a document that specifies the regulations for a company’s operations and defines the company’s purpose. The document lays out how tasks are to be accomplished within an organisation, including the process for appointing directors and how financial records are handled.
This is the document that arranges the internal relationships, for example, between members of the company, and the duties of directors. The Companies Act 1985 gives a model known as Table A.
Articles of association (also known as Articles of incorporation) along with Memorandum of Association are required by law to establish a company in the United Kingdom. The documents are often collectively referred to as the company’s constitution. Articles of association regulate the internal administrative and management responsibilities by setting out decision-making processes and other matters such as appointment and removal of directors, shareholders’ rights and procedures for board meetings.
If a company is established without custom model articles, default Table A or Model Articles will be adopted automatically.
Due to the changes that were brought by the Companies Act 2006, the old and new articles differ in some key areas. Some differences include:
Although, the above changes reduce the complexity and overall length of the new model articles of association they also mean that not all businesses will be able to use them. They are likely to perfectly fit small to medium businesses but most definitely will not be sufficient for advanced corporate business structures using venture capital and other private equity financings. If the new articles prove to be lacking, BIS recommends adding supplementing provisions from the public company model articles of association. In particular, it might be worth to consider the following:
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This glossary post was last updated: 25th February, 2020 | 9 Views.