The articles of association are the key constitutional document of a private limited company, setting out the rights attaching to the company’s shares and governing the manner in which the directors and shareholders conduct themselves.
The main purpose of a set of articles is to set out a framework for the management of the company and to regulate any dealings in the shares of the company.
All companies are required to have articles and, on incorporation, you may choose to adopt standard “Model Articles” (which apply by default).
The “Model Articles” are relatively short-form. They cover directors’ meetings and shareholder meetings, as well as the administration of dealing with directors and shareholders, but are mainly silent as to any restriction or regulation in dealing with the company’s shares.
Subject to the provisions of company legislation, companies are free to adopt, vary or exclude some or all of the Model Articles. Many companies with more than one potential shareholder opt to incorporate with tailored articles (or adopt new articles soon after incorporation) to include provisions governing how the shareholders can transfer or otherwise deal with their shares.