At the time of the formation of a company, it is a requirement to design two documents. These two documents set the basis for the company’s law. Hence, the law that company has to follow includes these two documents, namely, memorandum of association and articles of association or the constitution. Apart from these, every company has to follow same default set of rules, termed as Companies Act. The regulations of a company may not be restricted to these legislations. There may be different acts introduced time to time that may bring changes in the laws of any company. Such as Partnerships Act, Stock Transfer Act, Financial Services Act 1986. However, the concern of this article is to discuss some former and current rulings regarding Articles of Association.
Need of Articles of Association
According to Companies Act 2006 subsection 7ff, a company cannot be incorporated unless two documents are devised, that are memorandum of association and articles of association. After the authentication of memorandum, certain other documents and the memorandum have to be submitted to the Registrar per subsection 9ff of this act, if there are no articles of association for a company, the default Model Articles will be submitted as a replacement per Section 13 of Companies Act 2006. Hence, whether the company to be registered is unlimited, public, private or the entrepreneur intends to open ltd company in UK, the articles of association will have to be incorporated to register with companies house UK and for the operation of company.
Company’s Constitution according to Companies Act 2006
The following provisions in Companies Act 2006 discuss about the articles of association:
It is mandatory for every company to have its articles. They may be either of the following:
Removal of Objectives from the memorandum
It was a common practice in past and was in fact suggested in the Companies Act 1985 to include the objectives of a company in its memorandum of association. The objectives included the reasons for the formation of any particular company. For instance, a company may be formed for any social work, research and development, running schools etc. The reason for introducing objectives was to keep the members aware about the nature of activities being conducted by the company. Moreover, it also restricted the use of Director’s authorities for any out of bound activity. However, any activity outside the limits of objectives was considered void. This was beneficial for the company, as it would help it maintain the focus but at the same time detrimental to the company and third parties. For instance, many beneficial contracts would be termed as out of context with respect to the goals of a particular company.
However, in the 2006 version of Companies Act, this restriction of incorporating the objectives was lifted.
Constitution: The Binding Force of a Company
A constitution of any company plays the role of a binding force. The reason is that Section 33 of Companies Act 2006 entitles a constitution to restrict the company and the members in a way that it seems the company and every member has signed agreements separately to follow the provisions.
Former Provisions Regarding Articles of Association
Companies Act 1985 prescribes regulations for articles of association. Most of the Sections of 1985 Act have been either replaced or restated by the latest version of Companies Act. However, this Section just takes into consideration the former rulings on company’s constitution that were mentioned in 1985 Act.
Regulations by Articles for the Company
Section 7 of Companies Act 1985 is devoted for the description of articles of association. It provides separate rulings for a set up limited company companies house and unlimited companies.
Tables for Articles of Association
Different tables are suitable for the Articles of Association of various types of companies. Hence, any type of formation of UK company can incorporate the tables that are specifically designed for that type of company. Section 8 of Companies Act discusses about Table A, C, D and E.
Section 8-A of Companies Act 1985
A point to notice is that Section 8-A may be inserted only after the enforcement of Section 128 of Companies Act 1989.
Special Resolution for the amendment of articles
The Section followed by Section 8-A is Section 9 of Companies Act 1985. It states about the process of alteration in articles.
Power of Articles
Section 14 of Companies Act 1985 discusses about how effective a company’s constitution may be in governing the operations of the company.
Regulations given by the memorandum that could also be included in the articles
The rulings for conditions that may be given by memorandum as well as articles are mentioned in Section 17 of Companies Act 1985. They are as follows:
Changing the articles that are to be registered
Section 18 of the Companies Act 1985 mentions the rules to be followed after the amendment in articles or memorandum.
These were some of the regulations about articles of association that the Companies Act 1985 provided for. However, the 1985 and 1989 Acts have been altered and brought into almost a new form that is the Companies Act 2006. Hence, the provisions regarding articles may differ for the latest version of Companies Act. The articles of association are the constitution of a company. And govern the internal operation of any company. These articles along with the memorandum should be submitted to the Registrar for the registration of a company. The documents register with companies house UK and after the satisfaction of Registrar regarding the completeness of documents, the company is given a certificate of incorporation per Section 14 and 15 of Companies Act 2006.