Model Articles - Cutting the administrative burden on companies

The Companies Act 2006 promises to simplify many of the procedures faced by limited companies, but many of these advantages will be out of reach for existing companies until they amend their constitutions by adopting the “model articles”.

Prior to the 1st October 2009 the Articles of Association of most newly formed companies were based on Table A, a set of Articles set out in the schedules to the Companies Act 1985. Since that date, a new set of model articles has replaced Table A. There is no obligation on companies formed after the 1st of October to adopt these model articles but, much like Table A, it is likely that most new companies will use an adapted form of them. The model articles for private companies compliment the new Act, having been drafted with the small owner-managed business in mind. Helpfully, they are written in plain English as opposed to Table A’s occasionally difficult turn of phrase.

It is not just new companies that can adopt the model articles, they are open to all companies, but what are main differences?

The model articles dispense with the traditional form of the Memorandum of Association so gone are the restrictions of a company’s activities as there are no objects clauses. Unless a company specifically wishes to limit what it may do it will have unlimited objects making it hard to fall foul of the ultra vires rule.

The concept of an authorised share capital has also been discarded but, until removed, any reference in a company’s existing articles will act as a cap on further issuance.

In fact the way share capital is treated has been radically overhauled by the new Act see our note on share capital for more details.

By adopting the model articles, a company can also take advantage of some of the other features of the 2006 Act. There is no longer a requirement to hold an annual general meeting, or appoint a company secretary, although as ever the caveat “unless required to do so by its articles” still holds true.

Modernisation of company procedure now extends to the ability to send and receive notices by email, and to hold board meetings by telephone or video conference call, so waiting on the post or delays due to a lack of a physical presence at meetings could be a thing of the past.

Although a company can continue with its existing articles, it will be prevented from taking full advantage of the 2006 Act until it amends its constitution. To access some or all of these benefits, shareholders simply need to pass the appropriate resolution approving the new articles then notify Companies House. If you would like to offer your company these benefits, please contact the Tolhurst Fisher commercial department, or click the link below.