What are the Model Articles?

The Articles of Association of a company are the rules which its directors and shareholders must comply with in the operation and management of the company. They operate as a contract between the shareholders and the company. The directors of a company are under a statutory duty to act in accordance with its Articles of Association. The Companies Act 2006 (and associated regulations) provide a model set of Articles of Association for each of the different types of company which can be formed. These include Model Articles for private companies which are limited by shares. The Model Articles can be adopted by a company as its Articles of Association. Unless varied or replaced by a different set of Articles of Association, the Model Articles will apply. On formation of a company, the formation process requires a company either to confirm that the Model Articles will apply or to provide its own set of Articles of Association.

Articles of Association: wholly-owned company

Name: Articles of Association Template for Wholly-Owned Company
SKU: ART001.001
Price: 35.00 GBP
Availability: InStock

Articles of Association for a wholly-owned company, amending and supplimenting the Companies Act 2006 Model Articles, for use where the company has a single shareholder and is 100% owned either by an individual shareholder or by another company as part of a corporate group.

for a wholly-owned private limited company
for a company owned either by a single individual or another company
to adopt new Articles of Association which amend and supplement the Companies Act 2006 Model Articles
in conjunction with a special resolution of the sole shareholder to adopt the new Articles of Association

What are the key features?

in the form of new Articles of Association for the company
amendments and additions to the Companies Act 2006 Model Articles covering:
- number, appointment and removal of directors
- procedure and quorum for meetings of directors
- directors’ conflicts of interest and transactions with directors
- directors’ authority to allot shares
- ability for the company to purchase of shares out of capital
- potential for change of company name by directors resolution
- procedure for shareholder meetings

What else do I need to know?

Model Articles

The Articles of Association of a company are the rules which govern the operation and management of a company. They operate as a contract between the shareholders and the company. The directors are under a statutory duty to act in accordance with its Articles of Association.

The Companies Act 2006 provides a model set of Articles of Association, known as the Model Articles, which companies can adopt unless they choose to have their own separate form of Articles of Association. Unless varied or replaced by a different set of Articles of Association, the Model Articles will apply. On formation of a company, the registration process requires a company either to confirm that the Model Articles will apply or to provide its own set of Articles of Association.

Does a company need Articles of Association other than the Model Articles?

For a company which has two or more shareholders, the Model Articles should be amended or replaced by the company’s own form of Articles of Association.

Where a company is 100% owned by a single shareholder, the Model Articles will operate adequately in most circumstances. However, there are circumstances where a wholly-owned company might benefit from its own set of Articles of Association, such as:

a company with a single director. Following a reported legal case in 2022, there is legal uncertainty as to whether a single director of a company with the unamended Model Articles can, alone, legally manage and take decisions on behalf of a company if the company had previously had more than one appointed director. The Model Articles can be amended to remove this legal uncertainty.
a company with one or more directors who are not the sole shareholder. The Model Articles require the appointment of a director to be approved at a board meeting. Unless the director elects to resign (or in certain other limited circumstances), the removal of a director requires a shareholder resolution passed at a general meeting of which what is known as special notice under the Companies Act has been given. The Model Articles can be amended to enable the sole shareholder to appoint, remove and replace directors simply on written notice to the company.
director voting on transactions between the director and the company. The Model Articles restrict a director from voting on a matter which involves a transaction between the director and the company. To avoid having to pass a shareholder resolution to approve such a transaction, the Model Articles can be amended in advance to allow the relevant director to vote in these circumstances.
purchase of own shares. The Companies Act permits the small purchase of its own shares by a company out of capital if this is permitted by the Articles of Association. The Model Articles do not contain this permission and can be amended to include it.
change of name. The Companies Act allows a company to change its name in circumstances provided for in the Articles of Association. The Model Articles do not make specific provision for a change of name and can be amended to allow a change of name to be approved by directors rather than requiring a special shareholder resolution.

Adoption of new Articles of Association

This requires a special shareholder resolution. For simplicity, this can be passed as a written resolution signed by the sole shareholder.

Once adopted, the new Articles of Association (and shareholder resolution) will need to be filed at Companies House within 15 days of the passing of the shareholder resolution.

What other documents are available?

For examples of Articles of Association where the company has more than one shareholder, see

Description

When do I use this document?

to sub-divide issued shares into a larger number of shares
to consolidated issued shares into a smaller number of shares
typically, on closing of an investment transaction or in connection with an issue of new shares
if the resolution is to be approved at a general meeting, in conjunction with our template general meeting notice Shareholder meeting notice

What are the key features?

ordinary resolution to be passed as a written resolution
alternative forms of the resolution depending on whether the issued shares are being sub-divided or consolidated

What else do I need to know?

A private limited company can alter its share capital in various ways, including:

sub-division: sub-dividing issued shares into shares of a smaller nominal amount
consolidation: consolidating issued shares into shares of a larger nominal amount

Other types of share capital alteration include the allotment of new shares, reduction of capital, redemption or purchase of own shares and converting issued shares into shares of a different class.

Why would a company sub-divide shares?

Companies are often incorporated with a small number of ordinary shares. If the company plans to issue new shares, such as during an investment round, it may need to sub-divide the existing shares so that the numbers and percentages align with the investment terms.

For example, a company incorporated with 2 shares of £1.00 each will need to sub-divide them if it receives investment for 20% of the enlarged share capital.

To achieve the correct percentage shareholdings, one way of doing this would be to sub-divide the existing 2 shares of £1.00 each into 4 shares of £.0.50 each. The investor could then subscribe for 1 share of £0.50 and would own 1 out of the 5 shares in total, equal to 20% of the enlarged share capital.

Another idea would be to sub-divide the existing shares into a much smaller nominal share value as this will facilitate future shares issues and share transfers.

How does a company sub-divide its shares?

Sub-dividing shares requires an ordinary resolution of shareholders unless the Articles of Association exclude or restrict this. If such exclusions or restrictions exist, the Articles must be amended by special resolution to disapply the exclusion or restriction. After passing the ordinary resolution, the company will need to file Companies House Form SH02 within one month.

Why would a company consolidate shares?

Share consolidation is the reverse of sub-division, where a specified number of existing shares are consolidated into a single share or fewer shares.

Private limited companies are less likely to carry out a consolidation than a public company, which may do this to increase its traded share price or perhaps to reduce the number of shareholders on its register.

If a private company wished to consolidate its share capital, this requires an ordinary resolution of shareholders, unless the Articles of Association exclude or restrict this right. After passing the ordinary resolution, the company will need to file Companies House Form SH02 within one month.