How to Change a Company’s Articles of Association: A quick guide under English law

Changing the articles of association of a company registered in England & Wales involves several steps and must comply with specific legal requirements. The articles of association form the company’s constitution and outline the rules for running the company’s internal affairs. This guide provides a step-by-step approach to help you navigate the process of changing your company's articles of association under English law.

Understanding Articles of Association

The articles of association are a company's internal rulebook. They dictate how the company is governed and detail the responsibilities of directors, the handling of shares, the rights of shareholders, and the conduct of general meetings, among other things. Companies can use the Model Articles provided by the Companies Act 2006 or draft their own bespoke articles to better suit their specific needs.

Reasons for Changing Articles of Association

There are various reasons why a company might need to change its articles, including:

1. Adapting to Changes in Legislation: To ensure compliance with updated laws and regulations.
2. Company Growth and Evolution: To accommodate changes in business structure, such as expanding the board of directors.
3. Operational Efficiency: To streamline governance procedures or introduce new share classes.
4. Investor Requirements: To meet conditions set by new investors or stakeholders.

Legal Requirements for Amending Articles

To change the articles of association, a company must follow the procedures set out in the Companies Act 2006. Here are the key steps:

1. Drafting the Amendments: The exact wording of the amendments must be carefully drafted. This might require legal expertise to ensure the new articles are clear, lawful, and effective.
2. Board Resolution: The process typically begins with a board meeting where the directors propose the amendments. A resolution is passed to convene a general meeting of the shareholders to discuss and approve the proposed changes.
3. Shareholder Approval: The proposed amendments must be approved by a special resolution of the shareholders. This requires a majority of at least 75% of the votes cast at a general meeting. The notice period for calling a general meeting is usually 14 days, unless the articles specify a longer period. However, most small private companies will proceed by way of a written resolution of the shareholders, rather than calling a general meeting.
4. Filing with Companies House: Once the special resolution is passed, the company must file the amended articles with Companies House. This must be done within 15 days of the resolution being passed. The documents required include:
   - A copy of the special resolution.
   - A copy of the amended articles.
   - Form CC02 (if the amendments involve any removal of a restriction to amend the company’s articles of association).
5. Updating Company Records: Finally, the company’s statutory books and registers should be updated to reflect the changes. This ensures that all records are accurate and up to date.

Practical Considerations

1. Legal Advice: Given the complexity and importance of the articles of association, you may wish to seek legal advice. Please contact me if you need help. The cost for amending a company’s articles of association will typically be £3,500 + VAT, assuming I am instructed by the company - as opposed to being instructed by an individual shareholder, where each shareholder is separately represented.
2. Timing: Plan the timing of the changes carefully. Ensure there is adequate time to draft the amendments, call and hold the general meeting, and file the necessary documents with Companies House. The legal process of drafting changes and passing the written shareholder resolution will typically take a couple of weeks, plus whatever extra time the shareholders may take to discuss the changes internally.

Conclusion

Changing a company’s articles of association in England & Wales involves a well-defined legal process designed to ensure that such changes are made with proper authority of the shareholders and transparency as between the shareholders and directors. By following the steps outlined above, companies can successfully amend their articles to reflect their evolving needs and maintain compliance with the company law of England & Wales. By adhering to these guidelines, you can ensure that your company’s governance framework remains robust, adaptable, and aligned with its strategic objectives.