Companies Act 2006 - Simplifying The Way In Which Businesses Operate

One stated aim of the Companies Act 2006 ("the Act")

was to make it simpler for, in particular, small and medium sized

companies to set up and operate. This note briefly considers how,

by amending its Articles of Association, a company can benefit from

some of the changes brought about by the Act.

Before the remaining provisions of the Act are implemented on 1

October 2009, companies should review their current constitutional

documents in order to take advantage of these changes. Those

involved in arrangements such as shareholder and joint venture

agreements, may also consider potential changes to those documents

and their related Articles of Association. Those administering

public companies will probably already be going through a more

detailed review exercise in the light of the Act.

Articles of Association

Articles of Association are a public document open to inspection

at Companies House and, together with the Memorandum of

Association, form the constitutional documents of a company.

Articles of Association may only be altered by special resolution

by a company's members.

Articles of Association are covered by part three of chapter two

of the Act. Every company must have a set of Articles. These must

be filed with Companies House, unless they are "model

articles" which have not been modified. Model articles are

essentially standard sets of Articles which have been prepared for

the three most common types of companies:

Private companies limited by shares;

Private companies limited by guarantees; and

Public companies.

Model articles for each type of company will apply by default to

any company formed and registered under the Act. Companies can

choose to include the provisions of model articles in their own

Articles, with or without modification, provided of course they do

not conflict with any mandatory provisions of the Act. For most

small companies this is probably the best way to proceed, i.e.

adopting the provisions of model articles, perhaps in whole or

possibly with one or two small modifications.

For all companies incorporated before 1 October 2009 no changes

are required to their Articles of Association. However, an existing

private company may wish to adopt the private company new model

articles (with or without modifications), in place of its current

Articles. These model articles were designed with the needs of

small, owner managed businesses in mind and the provisions have

been kept as simple as possible. The Department for...