Setting Up The Legal Structure Of A New Company model articles uk companies act 2006
Setting Up The Legal Structure Of A New Company model articles uk companies act 2006
This following should give you ideas as to what to change in the broad structure. However, there will also be finer points. The most efficient way forward is also the easiest: take the third option and buy a ready-drawn set suitable for your company and the structure you want. The majority of new companies need no more than a very simple share class structure consisting of a round number of ordinary shares of £1 each. If your business model is for a single shareholder-director effectively to control the company without interference, your company articles will require many small changes to make that easy. To cater for such problems, you may include an “excluding provision” in your company articles. This provision should be worded so as to exclude the application of the model articles to the fullest extent. But note, by having such a provision, you can avoid the process under the model articles but you cannot deviate from, or override, the law. If your articles do not fix the quorum at general or directors’ meeting - it is just two people. Depending upon the situation it may be beneficial, or it may be rigid for your company. The following is what the law says about the "default application" of the model articles Companies Act 2006). If you do want different classes of shares, you should put them in place now, because the different rights you attach to them will affect other clauses within the articles. For example, "employee" shares may well have different rights to “founder” shares. So owners should decide how to structure and operate the business, and record that in the company's articles as early as possible. There is, therefore, no provision made for AGMs in the model articles on the assumption that most small private companies will take advantage of this change in the law. However, there are advantages in calling the shareholders together once a year to vote at one time on whatever important issues will affect the company in the near future. edit the model articles so that they suit your company You are required to disclose who has ultimate control over a company , whether that person does so because of the number of shares held, or because he or she can influence decisions in some other way. If you are a minority shareholder looking to increase your power through the shareholders agreement, you should be aware that doing so might make you a Person with Significant Control. We would love to hear what you think about this article and how we could improve it. Please do let us know. However, we shan't be able to reply to your specific questions. If you have a question about a document, please contact us . Then use a shareholders’ agreement for all the detail. You may like to read about shareholders’ agreements  here . If shareholders and directors do not follow the procedures set out in the articles and there is a dispute later, then those directors or shareholders involved in those decisions could be liable to the other owners if the company can be shown to have suffered a financial loss. Certainly, important decisions may be void. Books have been written about exit strategies and we cannot cover the multitude of possible strategies in a few words, but your starting point must be to consider what restrictions should be placed on all or specific shareholders. This subject is covered more fully in  share transfers and exit strategies .
The reason is explained in more detail here , but in short, company owners need to agree how things will be done in a given set of circumstances before the company finds itself in that situation. Often companies are owned by only two shareholders who have equal shareholdings. The CA and the model articles require the holders of the majority of shares to agree to some actions, and so two owners with 50% of the company each may face deadlock in decision making often unless the articles have been amended to provide a way of resolving decisions. Please note that the information provided on this page: Unless the articles say otherwise, any shareholder may transfer some or all of his or her shares to some other person. That other person could be someone’s aggressive yet inexperienced niece, model articles uk companies act 2006 or a complete stranger, or maybe another shareholder, who now controls the company and wants you out! It is essential at this time that you also create a private shareholders agreement that covers how decisions are made by owners, as well as other matters. adopt and leave in place the model articles - the default if you choose neither of the other two options Setting Up The Legal Structure Of A New Company model articles uk companies act 2006
Setting Up The Legal Structure Of A New Company model articles uk companies act 2006
If you do not mention in the articles who will determine the directors’ remuneration then the model articles allow the director himself to set it. You are unlikely to want the directors to have this power. The Companies Act 2006 prescribes a "model" set of articles of association. Although most new companies adopt these by default when they are incorporated , no company is obliged to do so. The model set was written as an example of what a company might have as articles, and to provide a safety net for any shareholders wanting to incorporate without fuss. "Paul Adams Associates Legal Services has used Net Lawman online legal documents on numerous occasions and have found their service to be very efficient and cost-effective. I have no hesitation in recommending Net Lawman to my associates." It does not matter what trade or business you want to use your company for. Your company's articles set out the way you operate it, the role of directors, and who is really in control. "I used to pre-work some contracts for my lawyer. He came back stating that the forms were 'excellent' and saved me several billable hours." They certainly provide useful guidance. But most private companies should change. The model articles of association are "model" not in the sense that they are perfect or recommended, but rather that they are a starting point. At the time of incorporation of a company you have three options: An alternative model to the autocratic shareholder director is for two or more people to operate the company together, as both directors and shareholders. In this case, the company structure must provide for fully democratic control and decision-making. For example, the appointment, removal and pay of directors should be subject to the shareholders’ consent. If you draw your own articles and unintentionally leave some matters silent, then the model articles comes into picture and automatically be applied to plug any gaps in your articles. So, if you want your company to hold annual general meetings, you may provide for it. "I was really pleased with my recent experience of using Net Lawman. I was able to obtain important legal documents, needed to support my small business. Net Lawman understood my needs and provided fast and efficient service without incurring the significant costs of a traditional law firm. I would both recommend and use Net lawman again" If you have noticed a bug or a mistake on this page, or just want to give us feedback, we'd love to know. Nothing is too small or too big. Send your message on this feedback page . The transfer provisions in the model articles are very broad. You should draw articles to deal with the questions of how shares can be transferred, to whom and under what circumstances. Remember that the Companies Act 2006 lays down the law as to what can be done through the articles. When you want to make an arrangement with specific people who are now shareholders, or to cover the detail of any situation, you should always use a shareholders’ agreement. If your articles are silent about the casting vote at the directors’ meeting, then by application of the model articles, the chairman will have the casting vote. Of course, sometimes how deadlock can be prevented is also addressed in the shareholders agreement. A private company is no longer required to hold an annual general meeting. So, do model articles contain pre-emption rights