The Companies Act 2006 made great changes to how directors and shareholders could manage a company. One of those was to change the standard set of articles called Table A to a 'model' version that by default all newly incorporated companies would adopt.
Company articles drawn before 2006 mostly reference Table A and as a result are very restrictive. That is because Table A contained so much legalese that it needed a lawyer to translate it, and as a result, few companies (particularly small ones) changed anything. However, under the new rules, you can make changes much more easily - provided they comply with CA 2006.
You can read about about the differences between model articles and Table A. By now, every old company using Table A should have reviewed its memorandum and articles with a view to deciding whether they should be updated.
In some cases, an update will be essential. In others, the decision can be deferred until the company wishes to make some other changes to structure or management.
Key benefits of adopting new articles
The benefits of adopting new articles include:
- Simplifying the constitution - the old style memorandum has been abolished. There is a shadow of it, but now only the articles are the governing 'rule book' of a company.
- Under the new law a company is authorised to do whatever business it is intended to do. There is no need to include objects clause - or to limit the company’s activities in any way. Of course, the business of your company may be such that you need to limit it because that is what the shareholders expect.
- There is no requirement to mention the authorised share capital of the company. A company can simply increase its share capital by issuing new shares. It can reduce share capital by a special resolution of the shareholders.
- There is no upper limit to the number of shares a company can issue. For some companies it may not be useful but for others it is worth mentioning.
- You may no longer issue nil paid or partly paid shares. A sensible addition for sound accounting reasons. If a shareholder has not paid for his shares, they are still fully paid shares but the accounts show a debt due by him.
- A private company no longer needs to hold an annual general meeting.
- The new law has recognised that electronic communication is an acceptable mode of communication.
- Private companies no longer need to appoint a company secretary. But if you wish you may do so.
- The obligations of a director are recognised more strongly. They can be reduced or changed but eyebrows may be raised at your bank or associate company if they were.
- A director is generally required to avoid any conflict of interest between themselves and the company and to disclose it if it cannot be avoided.
- There is a new procedure for a resolution to be passed either in a meeting (as ever) or by following the new procedure of a written resolution (sec-288-300 CA 2006).
How to update your articles?
If you wish to take advantage of the provisions in the Companies Act 2006 then you should review your company articles.
You can amend company articles at any point in time by passing a special resolution in a shareholders' meeting. In very broad terms, this means that 75 per cent of those eligible to vote on a proposed change must vote in favour of it.
The documents to adopt a new set of articles are available from Net Lawman.
File your amended articles to the Company House within 15 days of passing the resolution.
You could agonise for many hours over what should be changed. By far the easiest way to deal with all problems at once is to issue a new set based on a Net Lawman articles of association template. Each version has been carefully edited to suit a particular set of circumstances and is accompanied by extensive notes explaining each possible change.
If you are concerned to make sure any changes you have made to the Net Lawman template are appropriate, you can also take advantage of our Lawyer Assist service.