Model articles of association explained: what they cover and how to change them

When you incorporate a company at Companies House, you are asked to either select the model articles of association or upload a bespoke version. That choice confuses a lot of new entrepreneurs. The short answer is that the model articles are a standard set of rules for running a company, written by the government, and they are a perfectly sensible starting point if you do not have bespoke articles ready. They can be changed later, but only by a special resolution of the shareholders and with the change filed at Companies House.

What are articles of association?

Take a budding entrepreneur who is setting up a recruitment agency. She has decided to incorporate a company with Companies House, and part way through the process she is asked to choose between the model articles and a bespoke set. Before she can decide, she needs to know what the document is.

The articles of association are the rules that govern how a business is run internally. It is a document required by UK law for every private limited company, and it is registered at Companies House. In our example, the articles will dictate how the founder runs her business, including:

• the powers of the directors;
• the shares, and the voting rights and dividend rights attached to them; and
• how certain decisions are to be made.

Key provisions in the model articles

The model articles cover all of those matters in a standard form. They set out what the directors can do and how they take decisions, how shares and dividends work, and how the shareholders make the decisions reserved to them. If the founder has not had bespoke articles created in advance, she may well want to select the model articles for now. They will let her run the company properly from day one, and she can revisit them once she knows what the business needs.

That is the approach I would suggest for most founders who are incorporating alone or with one co-founder and have no investors lined up. The model articles are not a compromise; they are a complete set of rules that thousands of companies run on without ever amending them. Bespoke articles earn their keep when the company has different types of shareholder, outside investment, or specific arrangements about who controls which decisions.

How to change articles of association

The model articles can be amended to better suit the business as it grows. In brief, you need at least 75% of the voting shares, or of the shareholders, to be in favour of the decision to change the articles. The decision is taken at a general meeting of the shareholders. If the required proportion of shareholders are in agreement, a special resolution is passed and the articles are amended. For a founder who is the only shareholder, that majority is automatic; for a company with several shareholders, it means getting the others on board before the meeting.

Two further points apply:

• Filing. You will need to file documents with Companies House so that the change is on the public record.
• Validity. You will need to make sure that the changes you are making to the articles are legally valid. Not everything can be written into the articles, and a badly drafted amendment can cause more problems than it solves.

Next steps

If you are incorporating and have no bespoke articles prepared, select the model articles and move on. Once the business has shareholders, investors or more than one director, review whether the model articles still reflect how you want the company run. If they do not, follow the special resolution procedure and file the change, and speak to a corporate solicitor about the wording before the shareholders vote.