This template is for companies incorporated in Scotland. If your business is or will be incorporated in England or Wales, click here.
What are articles of association?
The basics: All limited companies must have articles of association (known as "articles" for short). These articles define the rules that a company, its directors and its shareholders must follow when running the company. This template also outlines the procedures for how shares will be dealt with, making decisions, appointing directors and conducting meetings. For a deeper dive into the importance of this document in the day-to-day running of your business, check out this comprehensive guide.
Legal necessity: Company law requires every company to have articles that are contained in a single document and divided into numbered paragraphs. A company can choose to adopt a set of default 'model articles' prescribed by the Companies Act 2006, or it can adopt its own custom set of articles. These articles of association are based on the model articles, but it also contains additional optional provisions that ensure that the articles are tailored to your company.
A contract based on company law, not a deal: Although the articles of association form the governing ‘rule book’ of a company, the articles are essentially a legally binding contract between the company and its shareholders. However, the articles are a special type of contract that does not follow usual contract law principles. For example, the articles of association can only be adopted or altered by passing a special resolution.
What is a special resolution?
Shareholders and/or directors of a company act by making formal decisions (known as resolutions) at meetings or by written resolution. To adopt these articles, a company's shareholders will need to pass a special resolution. Special resolutions are typically required for more critical or sensitive company decisions like altering the company's articles or changing the company name.
To pass a special resolution there needs to be:
-
a majority vote of not less than 75% of the shareholders who attend a general meeting if taken on a show of hands; or
-
not less than 75% of the total voting rights at a general meeting if taken on a poll or passed by written resolution.
Our simple guide to navigating your company's articles delves into the process of amending your company's articles. It also includes examples of when making amendments may be necessary, such as when your company intends to bring new investors on board and the articles need to be amended to reflect the subsequent negotiations.
What are the benefits of using Docue’s articles of association?
Take control of the company's rule book: The importance of articles of association goes beyond the reach of simply meeting legal requirements. They will set out rights associated with shares and will essentially serve as the company rulebook when it comes to the roles and responsibilities of both the shareholders and directors (which are also governed by statute). Well-drafted articles of association will bind all shareholders to a set of core rules and will serve as blueprints for how the company and its shareholders will need to conduct themselves.
Additional rights that aren’t in the model articles: These terms are based on the structure of the model articles for private companies limited by shares. However, this template gives you the option to include some modifications from the model articles including:
-
Pre-emption rights: A process that gives existing shareholders the right to be offered any new or existing shares before they are offered to anyone else. You can find out more about these rights by reading these FAQs answered by our legal experts.
-
Drag along right: Provisions that give the right to the majority shareholders to require the minority shareholders to sell their shares to a buyer at the same price and on the same terms as offered to the majority shareholders.
-
Tag along right: Provisions enabling the minority shareholders to require the majority shareholders to obtain the sale of their shares to a buyer at the same price and on the same terms as offered to the majority shareholders.
Have the company’s rules in one place: The clauses (articles) in this articles of association template are based on the model articles for private companies limited by shares, which are publicly accessible on the Companies House website. They incorporate the text of the model articles in full to avoid the need to refer to the new modified clauses separately from the model articles. For more information about the model articles, check out this guide.
Intentions to achieve B Corp Certification
This template includes optional wording designed to meet the criteria required for achieving B Corp certification concerning the company's objects. A "B Corp" company is one certified by B Labs for voluntarily meeting high standards of verified performance in various social and environmental metrics.
A key requirement for B Corp certification is that the company expressly states within its articles of association its commitment to promoting the benefit of its shareholders while also having a material impact on society and the environment. If you already have, or are planning to pursue, B Corp certification, the objects clause will typically be restricted to these specified objectives of the company. This template contains wording to restrict the objects to meet these requirements.
You can find more information about the legal requirements for B corp certification on the B Lab UK website.
When should I use this template?
This template should only be used for companies incorporated in Scotland. If your business is or will be incorporated in England or Wales, please see use this template.
Your articles of association are a fundamental document for the day-to-day running of your business. As it will be the rulebook of your business, you would refer to this document when tackling issues related to shares, directors, board meetings, and administrative tasks. You would also return to your articles of association when they need to be amended or updated.
You can use this template to determine a single class of ordinary shares.
What are the key terms that articles of association should include?
Docue's template for a company’s articles of association is based on the model articles, and includes the following sections:
Directors: This section will set out key procedures and rules relating to the directors of the business. This includes things like the appointment of directors, termination, and the chairing of board meetings.
Share capital: This section of the articles of association includes information on the rights attached to shares, payment of dividends, and share certificates.
Dealings with shares: This section sets out key information relating to the transfer of shares, when share transfers are permitted, and the rights associated with share transfers.
Shareholder’s decision-making: This section outlines how shareholders will make decisions. It also refers to general meetings, voting powers, and disputes.
Administrative provisions: The final part of this articles of association template includes information on administrative provisions, i.e. the liability of shareholders, director’s borrowing powers, and indemnity and insurance.
Why Docue?
Designed by lawyers: Our legal templates are drafted by qualified lawyers and each contains lawyer-crafted guidelines to steer you through every section. This means your company's articles will be equipped with the detail and format necessary to meet legal requirements.
Easy to use: To create your articles with confidence and speed, simply click through the tick box options in this template and you’ll have a comprehensive, tailored, and ready-to-use document at the click of a button. You can also store all of your finalised documents securely in Docue Drive.
Affordable: At Docue we’re determined to equip businesses with high-quality and quickly available contract and legal document templates, without the usual law firm bill or lengthy waiting time. Check out our pricing for a plan that suits your business.
Ready to get started? Sign up with Docue today and see just how easy it is to create your company's articles of association.
Tags: articles of association
