How much freedom do the members have concerning the articles?
- Are there any requirements concerning format and presentation?
- I have heard of model articles. What does this mean?
- My company was registered before 1st July 1985. What difference does it make and does it matter?
- I notice that Table C is much shorter than Table A. Does this mean that it is easier to use and that there are fewer regulations governing a company limited by guarantee?
- What are the basic choices concerning articles?
- What does the term 'default provision' mean in relation to articles?
- Is the answer to the last question true for a company limited by guarantee?
- Can the articles override the provisions of the Companies Act or other Acts?
They have a lot of freedom, though they cannot override the Companies Act and they cannot commit a fraud on the minority. The members own the company and so, within wide limits, they can have what rules they want. No one is forced to be a member of a company.
Are there any requirements concerning format and presentation?
The articles of association must be contained in a single document and be divided into paragraphs numbered consecutively.
I have heard of model articles. What does this mean?
For companies registered between 1st July 1985 and 30th September 2009 you are referring to the Companies (Tables A to F) Regulations 1985. In relation to companies registered between 1st October 2007 and 30th September 2009 the Tables have been amended by the Companies (Tables A to F) (Amendment) Regulations 2007 (SI2007/2541) and the Companies (Tables A to F) (Amendment)(No 2) Regulations 2007 (SI2007/2826). These are model sets of articles for the different types of company as follows:
Table A A company limited by shares
Table C A company limited by guarantee and not having a share capital
Table D A company (public or private) limited by guarantee and having a share capital
Table E An unlimited company having a share capital
For companies registered on or after 1st October 2009 the model articles are contained in The Companies (Model Articles) Regulations 2008 (SI2008/3229). These are model articles for the different types of company as follows:
A private company limited by shares
A private company limited by guarantee
A public company
My company was registered before 1st July 1985. What difference does it make and does it matter?
Your company is regulated by one of the earlier tables. This could be 1948, 1929 or even earlier. If you have special articles it may be less significant, but one of the earlier tables will be your default provision. This might not matter too much because in some ways the tables have remained similar. However, there are differences so you should not just assume that you can check something off in the latest table. It could matter because some people might not appreciate the potential problem.
It is not difficult to update your articles to the latest table or to make the latest table your default provision, provided that the members are willing to do so of course. You just need a short special resolution of the members. You might like to check that this has not been done sometime in the past.
I notice that Table C is much shorter than Table A. Does this mean that it is easier to use and that there are fewer regulations governing a company limited by guarantee?
Your observation is correct. Table A contains 118 regulations whereas Table C contains just 13, but neither of the conclusions are justified. This is because Table C states that most of Table A will apply, but that some of the regulations are excluded. Thirteen additional ones are then listed. If your company is limited by guarantee and registered before 1st October 2009 you will need to refer to both Table C and Table A.
What are the basic choices concerning articles?
There are three possibilities:
The relevant model articles can be adopted in their entirety and without modification.
The relevant model articles can be rejected and specially written articles adopted instead.
The relevant model articles can be adopted but modified to suit the company's particular needs. If this is done, the articles will normally start with a phrase such as 'The company shall adopt the Model Articles For Private Companies Limited By Shares (SI2008/3229) save as follows'. The document will then go on to exclude certain of the articles and to list some specially written ones.
If you are forming a company and not adopting the relevant model articles, you could write the articles yourself but this would probably not be a good idea. It would probably be necessary to get legal advice. Various trade associations and similar bodies provide specimen sets of articles for the use of their members. Also certain companies and legal stationers provide them. There are many possibilities. Specially written articles often contain many extracts from the model articles.
What does the term 'default provision' mean in relation to articles?
It means that each of the regulations in the relevant model articles will automatically apply to a company unless it has registered articles that exclude them. For example, Regulation 40 of Table A states 'Two persons entitled to vote upon the business to be transacted, each being a member or a proxy for a member or a duly authorised representative of a corporation, shall be a quorum. This is not compulsory and members are free to fix any other number, including just one person. However, if articles do not specify a number for a quorum or are not inconsistent with Table A, then Regulation 40 of Table A will apply. The above applies to a company having Table A as its default provision. The principle is the same (but the model articles are different) for a company registered from 1st October 2009.
Is the answer to the last question true for a company limited by guarantee?
The model articles for a private company limited by guarantee are the default provision for a company limited by guarantee registered from 1st October 2009. There is no default provision for a company limited by guarantee registered before 1st October 2009.
Can the articles override the provisions of the Companies Act or other Acts?
No they cannot. For example, a decision to voluntarily wind up the company requires a special resolution passed with a 75 per cent majority. If the articles state that a two thirds majority is sufficient, the Act will prevail and a 75 per cent majority will still be required.