Articles of Association (Including Entrenchment)
Entrenchment
1. Where can I find the Companies Act 2006 model articles?
Model Articles for the three most common types of company, ie:
• private companies limited by shares
• private companies limited by guarantee
• public companies
are available on the Companies House website
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2. Is there any guidance covering the model articles?
Guidance on the memorandum and articles of association under the Companies Act 2006 can be found here
Companies Act 2006 final implementation - changes to constitutional documents, including model articles: a summary of what the new approach means (PDF, 178KB)
The prescribed form of the new memorandum can be found in the Statutory Instrument which is on the Office of Public Sector Information (OPSI) site below
Statutory Instrument 2008 No 3014 - The Companies (Registration) Regulations 2008
It can also be viewed as a PDF
Statutory Instrument 2008 no 3014 - The Companies (Registration) Regulations 2008 PDF
Further guidance on incorporating a company can be found on the Companies House Website below
Chapter 1 of Companies House's guidance on Incorporation and Names
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3. Who do the model articles apply to?
The model articles apply new companies formed on or after 1 October 2009. They apply both to those that choose to adopt them and also, by default, to those that do not register articles of association of their own with the Registrar of companies.
The Companies (Model Articles) Regulations 2008
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4. What kinds of model articles are there?
There are model articles for private companies limited by shares, private companies limited by guarantee, and for public companies.
The Companies (Model Articles) Regulations 2008
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5. Why are there no model articles for private companies limited by guarantee or for unlimited companies?
These types of company are relatively rare and often have very specific needs that do not justify a standardised approach.
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6. Can companies cross-refer to provisions of model articles?
Yes. It is sufficient when filing articles with the Registrar for them to contain cross-references to the model articles that are being applied and, where relevant , to set out how these have been modified (ie by the omission of certain articles or by the deletion and replacement of certain words.
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7. Can private companies limited by shares incorporated under the Companies Act 2006 use the new public company model articles?
Private companies limited by shares may either adopt the public company model articles in their entirety on incorporation or produce bespoke articles which incorporate provisions of the public company model articles by reference.
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8. Does an existing private company need to amend its Articles if it wishes not have to a company secretary?
Whether a particular private company needs to amend its Articles before it ceases to have a company secretary depends on the company's articles. It would not have to do so if its Articles simply require or authorise things to be done by or to a secretary or provide as to the manner in which, or terms on which, a secretary is to be appointed or removed, as would be the case if it had adopted the relevant provisions in Table A. However the company would have first to amend its Articles if these include an express provision that it have a company secretary.
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9. What do I need to send the Registrar if I change my articles?
When a company make amendments to its articles of association (by special resolution), it must file an up to date copy of the entire set of articles not later than 15 days after the amendment takes effect. Failure to do this is an offence by the company and it officers, which carries a civil penalty.
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10. I intend to register a new unlimited company under the Companies Act 2006 - how does this affect me?
There is not a separate set of model articles for unlimited companies. These types of company are relatively rare and often have very specific needs that do not justify a standardised approach. Also, whereas model articles for limited companies can act as default articles, they cannot for unlimited companies.
Unlimited companies formed under the Companies Act 2006 are nonetheless advised to take into account the following points when drawing up their articles of association:
• There should not be a provision within the articles for the liability of the members to be limited; and
• Consideration should be given to the inclusion of an article containing power for an unlimited company by special resolution to increase or consolidate share capital, subdivide or cancel shares or reduce share capital and any share premium account.
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11. What are provisions for entrenchment?
In general a company can change its articles by special resolution (ie a vote passed by three-quarters of those participating). If a company’s articles contain restrictions on making changes so that specified articles can be changed only if conditions are met or procedures are complied with that are more restrictive than those for a special resolution, then those articles contain provision for entrenchment.
For companies formed under the Companies Act 2006, any provisions in the articles that cannot be changed by special resolution can be changed by unanimous agreement of the members of the company. This is the effect of section 22(3)(a).
Companies formed under the Companies Act 1985, or earlier legislation, may have entrenched provisions that can be amended only with something more than or different from a unanimous agreement of the members, such as the agreement of a third party, or may simply not allow of amendment under any circumstances. Such entrenchments in pre-existing companies will continue to be effective, under transitional provisions in paragraph 4(2) of Schedule 2 to the Companies Act 2006 (Commencement No. 8, Transitional Provisions and Savings) Order 2008 (SI 2008/2860) (“Eighth Commencement Order”).
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12. Why have you not commenced section22(2) of the Companies Act 2006?
Section 22(1) of the Companies Act 2006 defines “provision for entrenchment” and section 22(2) provides that such provisions can only be introduced in one of two ways: on formation, or by unanimous agreement of the members.
The Eighth Commencement Order would have commenced all of the remaining sections of Part 3 of the Companies Act, including all of section 22. After that Order was made, it was pointed out to us that there was some uncertainty as to whether the definition of “provision for entrenchment” in section 22(1) could catch provisions sometimes included in articles in connection with rights attached to classes of shares. This was a cause for concern because provisions that were caught could only be introduced by unanimous consent of all members, which might make it difficult to introduce or amend such provisions.
We therefore included an amendment to the Eighth Commencement Order in the Companies Act 2006 and Limited Liability Partnerships (Transitional Provisions and Savings) (Amendment) Regulations 2009 (SI 2009/2476) so that section 22(2) was not commenced on 1 October 2009. BIS will consider and consult further about what to do about section 22(2), and will make an announcement in due course.
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13. Does that mean that there are no requirements for entrenched provisions?
No. It will be possible to include provisions for entrenchment by amending the articles, which will require a special resolution in the usual way. But when including any provisions for entrenchment in the articles, their inclusion will still have to be notified to Companies House under section 23(1). And the removal of a provision for entrenchment will have to be notified under section 23(2). When a company has a provision for entrenchment in its articles, section 24 will require any changes to its articles to be accompanied by a statement of compliance when they are sent to Companies House.
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14. Does the uncertainty about whether provisions relating to variation of class rights are provisions for entrenchment apply to all such provisions?
No. Where provisions relating to class rights are not set out in the articles there is no uncertainty - the uncertainty only relates to provisions relating to the variation of class rights which are contained in articles and which provide that specified provisions in the articles can only be changed if a condition is met o by following a procedure that is more restrictive that those which apply in the case of a special resolution.
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