Your company’s Articles of Association are its internal rulebook. They set out how directors make decisions, how shares can be issued or transferred, and what rights shareholders have.
In most cases, it’s best not to amend your Articles unless there is a clear legal or practical reason to do so. The Articles are intended to provide long-term stability and certainty for the company and its shareholders, and frequent changes can lead to confusion or inconsistency. We tend to advise clients that, where possible, they should use a Shareholders Agreement as the ‘internal rule book’ and we look at this in more detail in Articles of Association versus Shareholders Agreement.
However, there are circumstances where an amendment to the Articles is the correct and sometimes necessary step. Below, we explain when that applies, why such changes matter, and how to make them properly under company law in England and Wales.
When You Might Need to Amend Them
If your business needs more flexibility (for example, to manage how shareholders interact or to set out dispute resolution processes) these matters can often be dealt with in a Shareholders’ Agreement instead. A Shareholders’ Agreement can include a clause confirming that, if there is ever a conflict between the two documents, the Shareholders’ Agreement takes precedence.
However, while amendments should generally be kept to a minimum, certain events make a review of your Articles sensible. Here are a few such scenarios:
Changes in Ownership or Structure
When new investors or shareholders join the company, you may need to create new classes of share, adjust voting rights or add clauses about voluntary or compulsory share transfers. The Articles should reflect each shareholder’s agreed rights.
Creating New Share Classes
Companies often introduce new share classes to attract investment or reward employees. Each class may carry different rights, such as preference on dividends or enhanced voting power. Your Articles must set out those rights clearly.
Updating Outdated Provisions
Many companies start with the Model Articles provided by Companies House. While useful for small or newly formed companies with one class of shares, they don’t always suit a growing business. If you’ve expanded or changed how decisions are made, the Model Articles may no longer fit.
How to Amend Articles
Before deciding to make amendments, it is worth reviewing whether your objectives could be achieved through a Shareholders’ Agreement instead. This approach maintains the stability of your Articles while allowing greater flexibility for the day-to-day running of the business.
If you must amend them, you can only do so by following the formal process set out in the Companies Act 2006. Informal changes or verbal agreements have no legal effect.
Step 1: Propose a Special Resolution
The directors usually propose an amendment by sending a written resolution to shareholders or by calling a general meeting. The proposed changes should be clearly set out in the notice of meeting or the written resolution.
Step 2: Gain Shareholder Approval
Only holders of classes of shares that have voting rights can vote. At least 75% of the shareholders present at a general meeting or, in the case of a written resolution, shareholders holding at least 75% of the shares must vote in favour for the special resolution to pass. The company’s records should include a copy of the resolution and minutes of the general meeting, if one was held.
Step 3: File the Amended Articles
Once approved, you must send the new Articles and a copy of the special resolution to Companies House within 15 days. The updated Articles take effect from the date the resolution is passed.
If your company has more than one class of shares, you may also need separate approval from affected shareholders before certain changes can be made.
Can Articles Be Amended Against a Shareholder’s Wishes?
Yes, amendments can be made even if some shareholders vote against them, as long as the company followed the correct procedures and the special resolution passes with 75% approval. However, those in the minority have legal protection.
Under section 994 of the Companies Act 2006, a shareholder can challenge changes that are unfairly prejudicial to their interests. For example, if an amendment removes rights from a specific shareholder or changes dividend entitlements in a way that benefits others, the court can intervene.
For that reason, directors should consider how any amendment affects all shareholders and take legal advice before moving forward.
Speak To JPP Law
Amending Articles of Association involves both legal drafting and procedural accuracy. Working with a solicitor can help you avoid costly mistakes and keep the company compliant. Our company law solicitors advise private companies across England and Wales on drafting, reviewing, and updating Articles.
We can guide you through the resolution process, prepare the necessary documents, and make sure your company’s constitution supports your business as it develops. To speak with a solicitor, contact JPP Law today.
